Emerging East Asia bond markets continue growth despite risks: ADB

Sep 18: Emerging East Asia’s local currency bond market expanded steadily in the second quarter of 2019 despite downside risks stemming from ongoing trade conflicts, according to the latest issue of the Asian Development Bank’s (ADB) Asia Bond Monitor.

“Foreign investment in emerging East Asia remains stable, but there are still considerable potential risks. Financial stability in the region could be undermined if global investors change their views on emerging markets,” said ADB Chief Economist Yasuyuki Sawada.

“Governments in the region would do well to continue to deepen local currency bond markets so they can act as a reliable local source of funding,” Sawada added according to an ADB statement received here Wednesday.

Despite the risks, foreign investment in emerging East Asia’s bond markets remained stable in the second quarter.

Foreign holdings of local currency bonds rose in the PRC on expectations of additional economic stimulus from the government and in Indonesia on the back of a credit ratings upgrade.

Holdings fell in the Republic of Korea, Malaysia, and the Philippines on a variety of domestic factors.

Local currency bonds outstanding in emerging East Asia totaled $15.3 trillion at the end of June, up 3.5% in US dollar terms from the end of March this year and 14.2% higher than the end of June 2018.

Bond issuance in emerging East Asia totaled $1.6 trillion in the second quarter, 12.2% higher than in the first quarter due to strong issuance of government bonds and a recovery in corporate bonds issuance.

At the end of June, there were $9.4 trillion in local currency government bonds outstanding, 13.6% higher than at end June 2018. The stock of corporate bonds was $5.8 trillion, up 15% compared with end June 2018.

APP