News Highlights - Week of 11 - 15 July 2016

To read the full report, data and graphs go to http://asianbondsonline.adb.org/newsletters/abowdh20160718.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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Bank Negara Malaysia decided in its Monetary Policy Committee meeting on 13 July to lower its overnight policy rate to 3.00% from 3.25%. The ceiling and floor rates for the overnight policy rate corridor were also reduced to 3.25% and 2.75%, respectively. The central bank stated that while the global economy was continuing to grow moderately, downside risks had increased following the European Union referendum in the United Kingdom. Meanwhile, the Bank of Korea’s Monetary Policy Board decided on 14 July to keep the base rate steady at 1.25%.

*     The People’s Republic of China’s (PRC) gross domestic product (GDP) grew 6.7% year-on-year (y-o-y) in the second quarter of 2016, the same rate of growth as in the prior quarter, resulitng in growth in the first half of the year of 6.7% y-o-y. Based on advance estimates of the Ministry of Trade and Industry, Singapore’s economy logged 2.2% y-o-y GDP growth in the second quarter of 2016 up from 2.1% y-o-y GDP growth in the prior quarter.

*     The PRC’s industrial production growth accelerated to 6.2% y-o-y in June from 6.0% y-o-y in May. Industrial production growth in Malaysia eased to 2.7% y-o-y in May from 3.0% y-o-y in April as the mining index contracted 1.1% y-o-y in May. In the Philippines, manufacturing production contracted in May as the Value of Production Index for total manufacturing fell 4.9% y-o-y and the Volume of Production Index for the manufacturing sector slipped 1.2% y-o-y.

*     Exports from Indonesia declined 4.4% y-o-y in June to USD12,917 million and imports fell 7.4% y-o-y to USD12,017 million. Indonesia posted a trade surplus amounting to USD900 million in June. In the Philippines, merchandise exports fell 3.8% y-o-y to USD4.7 billion in May, compared with a 4.1% y-o-y decrease in April.

*     Net foreign direct investment inflows in the Philippines surged to USD2,202 million in April from USD364 million in March amid monthly increases in nonresident investment via equity and investment fund shares and debt instruments, according to the Bangko Sentral ng Pilipinas (BSP). On a y-o-y basis, net foreign direct investment inflows grew 476.1% in April and 183.6% in January–April.

*     Net foreign portfolio investment inflows in the Philippines soared to USD451 million in June from USD73 million in May, according to the BSP. Gross inflows in foreign portfolio investment climbed to USD1,810 million while gross outflows decreased to USD1,359 million.

*     Overseas Filipinos' personal remittances to the Philippines rose 1.8% y-o-y in May to USD2.4 billion, according to the BSP. Over the January–May period, personal remittances were up 2.7% y-o-y and totaled USD12.0 billion.

*     Korea Gas Corporation priced two USD-denominated bonds last week: (i) a USD500 million 5-year bond on a 1.875% coupon and priced to yield 1.92%; and (ii) a USD400 million 10-year bond with a 2.25% coupon and 2.325% yield. KT Corporation, a telecom company based in the Republic of Korea, priced USD400 million worth of 10-year USD-denominated bonds at a 2.5% coupon and 2.588% yield last week.

*     Yields fell for all tenors in Indonesia, due to the planned tax amnesty and in Malaysia, due to the central bank rate cut. Yields fell for most tenors in Viet Nam.  Yields rose for all tenors in Hong Kong, China, following the rise in US yields due to better economic data. Yields also rose for most tenors in the PRC, the Republic of Korea, the Philippines and Thailand. Yield changes were mixed in Singapore. The 2-year versus 10-year yield spread fell in Hong Kong, China, Thailand and Viet Nam and rose in other emerging East Asian markets.

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