AsianBondsOnline Newsletter (5 September 2011)

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News Highlights – Week of 26 August – 2 September 2011

Gross domestic product (GDP) growth in the Philippines fell to 3.4% year-on-year (y-o-y) in 2Q11-the fourth straight quarter of slowing growth. The 2Q11 data brought the country’s GDP growth in 1H11 to 4.0% y-o-y following 4.6% growth in 1Q11. The slowdown in GDP growth was due to faltering global demand that curbed exports and investments. Despite the global slowdown, the Philippine economy benefited from a robust rebound in the agriculture sector; the sustained, albeit slowing, performance of the manufacturing sector; and balanced growth in the services sector. On the demand side, consumer spending also boosted GDP with growth of 5.4% y-o-y in 2Q11.

*Japan’s industrial production rose 0.6% in July from the previous month, the slowest monthly growth rate since March. In the Republic of Korea, industrial output in July grew at the slowest pace in 10 months, 3.8% y-o-y, as annual growth rates in manufacturing and producers’ shipments fell. In Viet Nam, industrial production surged 5.8% y-o-y and 4.3% month-on-month (m-o-m).

*Retail sales in Hong Kong, China grew 29.1% y-o-y to HKD35.2 billion in July on account of robust local consumption and tourist spending. In Viet Nam, the total value of retail sales of goods and services increased 22.2% to VND1,224 trillion (USD59.7 billion) in the first 8 months of the year.

*Consumer price inflation for the Republic of Korea accelerated to 5.3% y-o-y in August, the highest level in 3 years, mainly triggered by a sharp increase in food prices. In Thailand, consumer price inflation in August rose to 4.3% y-o-y, the highest level since September 2008, spurred by escalating food costs.

*The Republic of Korea’s trade surplus plunged to USD821 million in August from USD6.3 billion in the previous month, amid strong import growth and only modest export growth. In Thailand, the current account surplus widened to USD3.6 billion in July from USD2.5 billion in June, as the trade surplus for the month increased to USD2.7 billion from USD1.9 billion in the previous month.

*The People’s Bank of China (PBOC) announced its plan to include the margin deposits of commercial banks-the deposit paid by clients to secure the issuance of banker’s acceptance and letters of credit-as part of the reserve requirement in order to mop up excessive liquidity. Meanwhile, the State Bank of Viet Nam issued its decision, effective 1 September, to increase foreign currency reserve requirement ratios for demand deposits and time deposits.

*Last week, notable bond issuances from the People’s Republic of China included commerical paper from Sinohydro Group (CNY1 billion), Shaanxi Regional Electric Power (CNY1 billion), and Metallurgical Corporation of China (CNY3 billion). In the Republic of Korea, steel producer Posco priced a KRW500 billion 5-year bond at a coupon rate of 3.99%. In Thailand, Glow Energy Public Company Ltd. issued a 10-year bond worth THB5.6 billion with a 5.0% coupon.

*Government bond yields fell last week for all tenors in Viet Nam and for most tenors in the Republic of Korea, Malaysia, the Philippines and Singapore. Yields rose for all tenors in the PRC and for most tenors in Thailand. Yield movements were mixed in Hong Kong, China; and were mostly unchanged in Indonesia. Yield spreads between 2- and 10- year maturities widened in the Philippines and Thailand, while spreads narrowed in most other emerging East Asian markets.



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