AsianBondsOnline Newsletter (16 December 2013)

News Highlights - Week of 9 - 13 December 2013

Last week, the People's Bank of China (PBOC) allowed banks to issue negotiable certificates of deposit, a move widely regarded as a step toward interest rate liberalization in the People's Republic of China (PRC). The PBOC said that the market will be allowed to determine the rate paid on the certificates. The rules stipulate a minimum size of CNY50 million. The Shanghai Interbank Offer Rate (SHIBOR) will be used as the benchmark for pricing, with trading conducted on the interbank market. In response, China Construction Bank and the Bank of China announced that they plan to issue certificates of deposit worth CNY5 billion each, while Industrial and Commercial Bank of China, Agricultural Bank of China, and China Development Bank will each issue CNY3 billion of certificates of deposit.

*     Policy rates were held steady last week in Indonesia (7.50%), the Republic of Korea (2.50%), and the Philippines (overnight borrowing rate at 3.50% and overnight lending rate at 5.50%).

*     Industrial production in the PRC rose 10.0% year-on-year (y-o-y) in November, down slightly from 10.3% growth in October. Retail sales in the PRC rose 13.7% y-o-y in November, a slight increase from October's growth of 13.3%. Malaysia's industrial production expanded 1.7% y-o-y in October following 1.0% growth in the previous month. Sales in Malaysia's manufacturing sector grew 1.9% y-o-y to MYR54.2 billion in October.

*     The Philippines' merchandise exports rose 14.0% y-o-y in October to US$5 billion from a revised 5.1% growth rate in September. The growth was supported by gains in nine major commodity groups led by chemicals (96.4%), machinery and transport equipment (89.9%), other mineral products (89.1%), and apparel and clothing accessories (75.1%). Meanwhile, Japan posted a current account deficit of JPY127.9 billion in October due to a lower income surplus and a higher trade deficit.

*     Net foreign investment in the Republic of Korea's local currency (LCY) bond market was negative for the fourth consecutive month in November, as foreign investor net bond outflows reached KRW1.0 trillion for the month, based on Financial Supervisory Service (FSS) data.

*     On 12 December, Bank of Japan, (acting as the agent for the Minister of Finance of Japan), and Bank Indonesia signed the third Bilateral Swap Arrangement (BSA). Under this new arrangement, the size of the facility was increased to US$22.76 billion from US$12 billion. The BSA also introduces a new feature in the form of a crisis prevention scheme to support potential and/or actual liquidity requirements.

*     Panda Funding Investment, an SPV of Hebei Iron and Steel (Hong Kong, China) International Trade, issued a 3-year private placement bond last week with a size of CNY910 million. The bond was issued at a yield of 3.95% and is collateralized by a US$-denominated Standard Chartered floating rate loan to Hebei Iron and Steel (Hong Kong, China) International Trade.

*     Government bond yields fell last week for most tenors in Indonesia, the Republic of Korea, Malaysia and Viet Nam, and rose for most tenors in the PRC; Hong Kong, China; and the Philippines. Yield movements were mixed in Singapore and Thailand. Yield spreads between 2- and 10- year maturities widened in the PRC, the Republic of Korea, the Philippines, Singapore and Viet Nam, while spreads narrowed in other emerging East Asian markets.  

*     The 16 December issue of the Weekly Debt Highlights is the last issue for 2013. Issuance will resume on 6 January 2014.