Investors returning to most emerging East Asia Markets – Asia Bond Monitor

by **Cals** Thu 05 Jun 2014, 20:16

Business & Markets 2014

Written by Surin Murugiah of theedgemalaysia.com

Thursday, 05 June 2014 11:32

KUALA LUMPUR (June 5): Local and offshore demand for emerging East Asia’s local currency bonds is rising again and should continue given strong economic growth prospects in the region, according to the Asian Development Bank’s (ADB) latest Asia Bond Monitor.

In a statement June 4 on its website, Iwan J. Azis, Head of ADB’s Office of Regional Economic Integration said most emerging East Asia bond markets had regained their bounce.

“Thailand’s bonds though could buck the trend given recent political upheavals and investors there are likely to be cautious for some time,” he said.

The ADB said despite the recent improvements, markets could still be jolted by the ongoing tapering in US quantitative easing, the slowdown in economic growth in China, or moves by the European Central Bank to counter the threat of deflation.

Only by taking the lead in implementing better regulation and oversight of the financial system can Asia mitigate these risks, it said.

Emerging East Asia is defined as China; Hong Kong, China; Indonesia; Republic of Korea; Malaysia; Philippines; Singapore; Thailand; and Vietnam.

The bond monitor showed that bond yields—which fall as demand increases—declined in most economies in the first four months of the year, dropping most in Indonesia, Thailand, and Vietnam.

However, investors in Thai bonds are now on the sidelines and yields could rise going forward, said the ADB.

Meanwhile, yields in the Philippines went up in January through April amid rising inflation, it said.

The ADB said the markets also continue to grow in size with US$7.6 trillion in bonds outstanding in the nine economies at the end of March, up 2.1% on the quarter and 9.5% higher than a year earlier.

It said Vietnam’s was the fastest growing market on a quarterly basis while Indonesia’s market grew fastest on an annual basis.

Thailand had US$281 billion in outstanding baht-denominated bonds as of the end of March, 1.2% more than at the end of December 2013 and 5.7% more than at the end of March 2013, said the ADB.

The region also continues to see encouraging developments within the bond markets, the report says.