AsianBondsOnline Newsletter (14 July 2014)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20140714.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 7 - 11 July 2014

Bank Negara Malaysia (BNM) raised by 25 basis points (bps) to 3.25% its overnight policy rate at its Monetary Policy Committee meeting on 10 July, marking the first rate hike since May 2011. While inflation remained relatively stable, BNM expects inflation to exceed its long-run average on higher domestic cost factors. According to BNM, the rate hike seeks to mitigate the risk of broader economic and financial imbalances that could undermine the growth prospects of the Malaysian economy. Meanwhile, Bank Indonesia held steady its benchmark rate at 7.50%, and The Bank of Korea maintained its base rate at 2.50% last week.

*     The People’s Republic of China’s (PRC) consumer prices rose 2.3% year-on-year (y-o-y) in June after gaining 2.5% in May. The lower inflation rate in June was due to slower price increases in food items. In contrast, producer prices fell in June 1.1% y-o-y, compared with May’s 1.4% decline.

*     The Bank of Korea revised downward its economic growth forecast for the Republic of Korea to 3.8% from 4.0% in 2014, and to 4.0% from 4.2% in 2015. The downward revisions were on the back of expectations of slower growth in household spending, construction investment, and exports.

*     Malaysia’s industrial production growth climbed to 6.0% y-o-y in May from a revised 4.9% gain in April. All major sectors contributed to the rise in output—manufacturing gained 7.8%; mining, 1.4%; and electricity, 4.6%. On a seasonally adjusted month-on-month (m-o-m) basis, the Industrial Production Index (IPI) rose 0.6%.

*     Exports from the PRC rose 7.2% y-o-y in June, slightly higher than May’s 7.0% gain.  Imports on the other hand, rose 5.5% in June versus a 1.6% drop in May. The PRC reported a trade surplus of US$31.6 billion for June. In the Philippines, exports expanded 6.9% y-o-y to US$5.5 billion in May after a revised 1.3% growth in April.

*     Foreign net bond investment in the Republic of Korea stood at KRW442 billion in June, down from KRW807 billion in May, amid a relatively larger monthly increase in bond redemptions versus purchases, according to the Financial Supervisory Service (FSS).

*     Kookmin Bank, based in the Republic of Korea, priced US$500 million worth of 3-year bonds at a coupon rate of 1.625% last week. Sumitomo Mitsui Banking issued a US$3.0 billion multi-tranche offering consisting of a US$1.0 billion 3-year bond at a coupon of 1.35%, a US$1 billion 5-year bond at a coupon of 2.25%, and a US$500 million 10-year bond at a coupon 3.4%. Another US$500 million 3-year floating rate bond was priced at the 3-month Libor plus 32 bps. DBS Bank priced a dual-tranche bond last week consisting of a US$750 million 5-year fixed rate senior note at a coupon of 2.246%, and a US$500 million 5-year floating rate bond. In Singapore, Pacific International, a shipping and logistics services company, priced a SGD300 million 3-year bond at a coupon of 5.9%. In Malaysia last week, CIMB Thai Bank issued MYR400 million of Basel III-compliant, Tier 2 subordinated debt carrying a coupon rate of 5.6%.

*     Government bond yields fell for all tenors in the Republic of Korea and fell for most tenors in the PRC; Hong Kong, China; Indonesia, the Philippines, Singapore, and Viet Nam. Yields were mixed in Malaysia and Thailand.  The spread between the 2-year and 10-year bonds narrowed for most markets except for the PRC and the Philippines.

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