AsianBondsOnline Newsletter (10 March 2014)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20140310.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 3 - 7 March 2014

The People's Republic of China (PRC) held its annual session of the National People's Congress last week and pledged that it would maintain a growth target of 7.5% for 2014. The government is also seeking to rebalance the economy, saying that it will shift from export- and investment-driven growth to growth fueled primarily by domestic consumption. Other reforms mentioned include the implementation of deposit insurance, expansion of the renminbi trading band, liberalization of capital accounts, promote market-determined interest rates, and encourage establishment of small- and medium-sized financial institutions by the private sector.

*     Consumer price inflation eased in Indonesia (7.8%), the Republic of Korea (1.0%), and the Philippines (4.1%), while inching up in Thailand (2.0%), in February. At its Monetary Policy Committee meeting on 6 March, Bank Negara Malaysia (BNM) decided to maintain its overnight policy rate at 3.0%.

*     Singapore's Purchasing Managers Index (PMI) expanded to 50.9 in February. In Viet Nam, industrial production rose 15.2% year-on-year (y-o-y) in February and retail sales of consumer goods and services increased 11.6% y-o-y in January-February.

*     Moody's last week affirmed Cambodia's rating at B2 with a stable outlook. Moody's believes that the country's fundamentals are resilient in spite of concerns over recent political uncertainties and the future of the garment market.

*     On 6 March, Bank Indonesia and The Bank of Korea signed a bilateral local currency (LCY) swap agreement to enhance bilateral trade between Indonesia and the Republic of Korea. The agreement allows for the bilateral exchange of Indonesian rupiah and Korean won between the two central banks worth up to IDR115 trillion or KRW10.7 trillion for a period of 3 years.

*     LCY corporate debt issuance in the Republic of Korea rose 22.2% y-o-y and 11.5% month-on-month (m-o-m) to KRW8.5 trillion in January, based on Financial Supervisory Service data.

*     Net foreign investment in the Republic of Korea's LCY bond market turned negative in February, as foreign investors posted net bond investment outflows of KRW1.8 trillion following net bond investment inflows of KRW655 billion in January.

*     Last week, the Indonesian government raised IDR19.3 trillion from the sale of 3-year retail sukuk (Islamic bonds). The retail sukuk were structured following the principle of ijarah (asset to be leased) and carried profit rate of 8.75%. In Malaysia, government-owned transport operator Syarikat Prasarana Negara issued a MYR2 billion sukuk murabahah comprising a MYR1.5 billion 5-year tranche at a profit rate of 4.08% and a MYR500 million 10-year tranche at a profit rate of 4.67%. Ping An Insurance issued Tier 2 capital bonds under the new Basel III rules worth CNY9 billion and with a tenor of 10 years. The yield of the bond was set at 6.8%. 

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

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