Asia Bond Monitor - March 2013

Publication | March 2013

Asia Bond Monitor reviews recent developments in East Asian local currency bond markets along with the outlook, risks, and policy options.

The economic outlook for emerging East Asia is brightening with growth in the People's Republic of China (PRC) accelerating toward the end of 2012 and strong domestic demand in Southeast Asia sustaining robust growth.

The region's local currency (LCY) bond markets continued to expand albeit at a slower rate in the last quarter of 2012, reflecting sluggish growth in government bonds in some markets. The corporate bond sector however performed strongly with markets in Indonesia and the PRC leading the growth.

Risks to the region's LCY bond markets are biased toward the downside, including the budget deadlock impeding the United States' recovery, stronger growth that may lead to higher interest rates and inflation, and a surge of destabilizing capital inflows into the region.

The March 2013 edition features a special section, Managing Capital Flows in LCY Bond Markets.

Some highlights from this issue of the Asian Bond Monitor:

  • Total bonds outstanding grew 3.0% quarter-on-quarter and 12.1% year-on-year to reach $6.5 trillion at the end of 2012, primarily due to strong growth in emerging East Asia's corporate bond sector in the last quarter.
  • The five most rapidly growing markets in the fourth quarter were Viet Nam (17.6%), the Philippines (7.5%), Thailand (4.2%), Indonesia (3.3%), and the People's Republic of China (PRC) (3.0%).
  • The region's two most rapidly growing corporate bond markets in the fourth quarter were those of Indonesia and the PRC, which grew 9.4% and 9.3%, respectively. The next three most rapidly growing corporate bond markets were those of Thailand (6.7%), the Republic of Korea (4.1%), and Malaysia (3.9%).
  • In the same quarter, total government bonds outstanding in emerging East Asia grew only 1.4%, reflecting very slow growth in the PRC even as growth in Viet Nam, the Philippines, Thailand, and several other markets remained relatively robust.

The Asia Bond Monitor (ABM) reviews recent developments in East Asian local currency bond markets along with outlook, risks, and policy challenges. It covers the 10 members of the Association of Southeast Asian Nations (ASEAN) plus the People's Republic of China; Hong Kong, China; and the Republic of Korea.

"The Asian Bond Monitor has become the definitive guide to the development and structure of the emerging East Asian bond markets. As such, it is essential reading for anyone involved or interested in this increasingly important and rapidly growing asset class. It is full of valuable information, presented clearly in charts and tables, as well as insights and special topics to help investors and market participants keep in touch with this fast moving environment.

The Asian Bond Monitor gives a holistic and uniquely objective survey of the region which aids in better understanding thereof and as such should ultimately have a positive effect on the development of the bond markets themselves."

- Geoffrey Lunt, Senior Product Specialist, Asian Fixed Income, HSBC Global Asset Management (Hong Kong) Ltd.

Contents 

  • Highlights
  • Introduction: Global and Regional Market Developments
  • Bond Market Developments in the Fourth Quarter of 2012
  • Policy and Regulatory Developments
  • Managing Capital Flows in Local Currency Bond Markets
  • Market Summaries