currency bond markets predictions in emerging East Asia predictions : CURRENCY bond markets in emerging East Asia, which includes the Philippines, grew robustly in the first half as investors chased higher returns for their investments, the Asian Development Bank (ADB) said in a report yesterday.
Other drivers were strong economic fundamentals in the eight-country bloc, interest rate differentials and expectations regional currencies will appreciate, the ADB said in the latest “Asia Bond Monitor.”
Industry experts said the uptick is expected to continue for the rest of the year in the Philippines.
But risks such as a growth slowdown in the advanced economies that will negatively affect exports from emerging East Asia, a reversal of capital flows, and commodity price fluctuations abound moving forward.
“Local currency bond markets in emerging East Asia continued to expand in the first half of this year as demand from foreign investors increased, with the region’s economic growth set to outpace much of the rest of the world,” the ADB said in a statement posted on its Web site.
ADB noted strong capital flows into the region’s bond markets “as investors chase yields.” It said “relatively strong economic fundamentals, interest rate differentials, and the potential appreciation of regional currencies” also pulled money into the region.
The region’s local currency bond market rose by 7.7% year-on-year in the first half to $5.5 trillion in outstanding bonds.
Corporate bonds grew by 19.6%, faster than the 2.7% for government bonds.
“Emerging East Asia” is composed of China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
For the Philippines, outstanding local currency bonds hit P3.26 trillion as of end-June, of which $2.84 trillion were in government bonds and P417 billion were in corporate bonds.
Growth was 6% year-on-year in the first half, but this paled in comparison to Vietnam’s 18.8% surge, Singapore’s 18%, Malaysia’s 16.7%, Korea’s 8.1% and China’s 6.7%.
The Philippines is slightly ahead of Hong Kong’s 5.1% growth, Indonesia’s 2.4% and Thailand’s 6.2%.
For corporate bonds, the Philippines was one of the lead gainers, with issuance in the first half spiking by 77.2% to P32 billion, next only to the 104.9% uptick in Indonesia.
“Total outstanding local currency corporate bonds stood at P417 billion at end-June. In total, there were less than 50 firms with corporate bonds outstanding, while the top 30 issuers accounted for more than 93% of the total,” the report read.
With regard to yields, the ADB said the Philippines gave one of the highest returns in the region.
“Returns on local currency bonds have remained buoyant in most of the region’s markets in 2011, with Indonesia, Singapore, the Republic of Korea, the Philippines, and Malaysia posting the largest gains,” the report read.
“Indonesian bonds were the best performers, gaining 15.2%, followed by Singapore at 10.9%, Korea at 10.3%, the Philippines at 7.2% and Malaysia at 6.3%,” it added.
Industry players said the results of the report were not surprising.
“We anticipated [that result] because we believe, for one, there is massive liquidity and there is high asset yield and returns, driving an active primary and secondary [market] trading,” Roberto Juanchito T. Dispo, president of First Metro Investment Corp., said in a telephone interview.
He added that volatility in developed markets prompted investors to flock to emerging markets.
“The scenario globally is, growth in developed countries is showing signs of strain,” said Marcelo E. Ayes, senior vice-president at Rizal Commercial Banking Corp., in a telephone interview yesterday.
“Emerging markets, especially China, have prospects for [yield] appreciation. And also, growth there will be higher than in developed economies,” he added.
But ADB warned of risks moving forward.
“The risks to the outlook are tilted to the downside. These include a severe slowdown or contraction in mature economies that might impact exports from the region, destabilizing capital flows, a lack of timely and appropriate policy interventions in mature markets and potential commodity price fluctuations,” the report read.
Mr. Ayes raised the danger of sudden outflows when problems escalate in Europe and the United States, resulting in risk aversion.
Other drivers were strong economic fundamentals in the eight-country bloc, interest rate differentials and expectations regional currencies will appreciate, the ADB said in the latest “Asia Bond Monitor.”
Industry experts said the uptick is expected to continue for the rest of the year in the Philippines.
But risks such as a growth slowdown in the advanced economies that will negatively affect exports from emerging East Asia, a reversal of capital flows, and commodity price fluctuations abound moving forward.
“Local currency bond markets in emerging East Asia continued to expand in the first half of this year as demand from foreign investors increased, with the region’s economic growth set to outpace much of the rest of the world,” the ADB said in a statement posted on its Web site.
ADB noted strong capital flows into the region’s bond markets “as investors chase yields.” It said “relatively strong economic fundamentals, interest rate differentials, and the potential appreciation of regional currencies” also pulled money into the region.
The region’s local currency bond market rose by 7.7% year-on-year in the first half to $5.5 trillion in outstanding bonds.
Corporate bonds grew by 19.6%, faster than the 2.7% for government bonds.
“Emerging East Asia” is composed of China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
For the Philippines, outstanding local currency bonds hit P3.26 trillion as of end-June, of which $2.84 trillion were in government bonds and P417 billion were in corporate bonds.
Growth was 6% year-on-year in the first half, but this paled in comparison to Vietnam’s 18.8% surge, Singapore’s 18%, Malaysia’s 16.7%, Korea’s 8.1% and China’s 6.7%.
The Philippines is slightly ahead of Hong Kong’s 5.1% growth, Indonesia’s 2.4% and Thailand’s 6.2%.
For corporate bonds, the Philippines was one of the lead gainers, with issuance in the first half spiking by 77.2% to P32 billion, next only to the 104.9% uptick in Indonesia.
“Total outstanding local currency corporate bonds stood at P417 billion at end-June. In total, there were less than 50 firms with corporate bonds outstanding, while the top 30 issuers accounted for more than 93% of the total,” the report read.
With regard to yields, the ADB said the Philippines gave one of the highest returns in the region.
“Returns on local currency bonds have remained buoyant in most of the region’s markets in 2011, with Indonesia, Singapore, the Republic of Korea, the Philippines, and Malaysia posting the largest gains,” the report read.
“Indonesian bonds were the best performers, gaining 15.2%, followed by Singapore at 10.9%, Korea at 10.3%, the Philippines at 7.2% and Malaysia at 6.3%,” it added.
Industry players said the results of the report were not surprising.
“We anticipated [that result] because we believe, for one, there is massive liquidity and there is high asset yield and returns, driving an active primary and secondary [market] trading,” Roberto Juanchito T. Dispo, president of First Metro Investment Corp., said in a telephone interview.
He added that volatility in developed markets prompted investors to flock to emerging markets.
“The scenario globally is, growth in developed countries is showing signs of strain,” said Marcelo E. Ayes, senior vice-president at Rizal Commercial Banking Corp., in a telephone interview yesterday.
“Emerging markets, especially China, have prospects for [yield] appreciation. And also, growth there will be higher than in developed economies,” he added.
But ADB warned of risks moving forward.
“The risks to the outlook are tilted to the downside. These include a severe slowdown or contraction in mature economies that might impact exports from the region, destabilizing capital flows, a lack of timely and appropriate policy interventions in mature markets and potential commodity price fluctuations,” the report read.
Mr. Ayes raised the danger of sudden outflows when problems escalate in Europe and the United States, resulting in risk aversion.
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