AsianBondsOnline Newsletter (29 September 2014)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20140929.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 22 - 26 September 2014

Emerging East Asia’s local currency (LCY) bonds have performed well so far in 2014, but an earlier-than-anticipated rate hike in the United States (US), a slowing property market in the People’s Republic of China (PRC), and higher inflation and greater risk aversion arising from Middle East tensions could undermine performance, reports the latest quarterly Asia Bond Monitor from the Asian Development Bank (ADB). The region’s LCY bonds outstanding climbed 2.5% quarter-on-quarter (q-o-q) and 9.3% year-on-year (y-o-y) in 2Q14 to reach US$7.9 trillion at end-June. Please click here to download the full Asia Bond Monitor (ABM) report.

*     Viet Nam’s real gross domestic product (GDP) growth accelerated to 6.2% y-o-y in 3Q14 from revised growth of 5.4% in 2Q14. For the first 3 quarters of 2014, the country’s GDP growth reached 5.6%, up from 5.2% in the first half. The growth was driven by the services, and industry and construction sectors.

*     Hong Kong, China’s consumer prices rose 3.9% y-o-y in August, slightly lower than July’s 4.0% increase. In Japan, consumer price inflation eased to 3.3% y-o-y in August from 3.4% in July. In Singapore, consumer price inflation eased to 0.9% y-o-y in August from 1.2% in July. In Viet Nam, inflation eased to 3.6% y-o-y in September—the slowest pace since October 2009—from 4.3% in August.

*     Hong Kong, China’s export growth decelerated to 6.4% y-o-y in August from 6.8% in July, and import growth declined to 3.4% y-o-y in August from 7.5% a month earlier, resulting in a trade deficit of HKD31.5 billion. Meanwhile, the balance of payment (BOP) surplus fell in 2Q14 to HKD12.2 billion versus HKD32.2 billion in 1Q14. The Philippines’ merchandise trade deficit narrowed to US$33 million in July from US$635 million a year earlier, as exports grew 12.4% y-o-y while imports remained unchanged. In Viet Nam, exports grew 14.1% y-o-y in January–September, the same pace as in January–August, while imports slowed to 11.1% from 12.0%.

*     Singapore's manufacturing output growth climbed to 4.2% y-o-y in August from 3.3% July. In Viet Nam, industrial production rose 8.6% y-o-y in September, compared with a 6.7% gain in August.

*     In the Republic of Korea, sales of discount outlets and department stores grew 3.2% y-o-y and 10.5% y-o-y, respectively, in August. In Viet Nam, retail sales climbed 11.1% in January–September, compared with growth of 11.4% in the first 8 months of the year.

*     Last week, the Philippines’ Bureau of the Treasury issued a circular allowing non-restricted trading across tax categories in the secondary market for LCY coupon-bearing government securities, with the intention of deepening liquidity in the bond market and providing additional investment avenues for tax-exempt institutions and individuals. The circular also stated the tax tracking mechanisms and operating guidelines to be used in the trading and settlement of the bonds. These include, among others, the opening of a Securities Account for Tax Tracking (SATT) and the reimbursement of tax proceeds that may have been deducted from the proceeds of the tax-exempt seller.

*     Local currency government bond yields fell for all tenors in Viet Nam last week. Yields fell for most tenors in the PRC; Hong Kong, China; Republic of Korea; Malaysia; Thailand; and Singapore. Yields rose for most tenors in Indonesia. Meanwhile, yield movements were mixed in the Philippines. Yield spreads between 2- and 10-year tenors narrowed in all markets except for Indonesia and Philppines.

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