Positive investor sentiment over continued improvement in global economic prospects helped drive yields lower in most markets in emerging East Asia between 1 March and 15 May, according to the latest Asia Bond Monitor. Emerging East Asia’s local currency bond market continued to expand in the first quarter (Q1) of 2017, with outstanding bonds reaching USD10,513 billion at the end of March. Despite improved financial stability and receding risks for emerging East Asia’s bond markets, some risks remain such as tightening global liquidity conditions and the vulnerability of financial markets to cyberattacks. A copy of the full report is available at https://asianbondsonline.adb.org/documents/abm_jun_2017.pdf.
Singapore’s manufacturing output growth eased to 5.0% year-on-year (y-o-y) in May from 6.7% y-o-y in April due to the contraction of the biomedical manufacturing cluster.
The Bangko Sentral ng Pilipinas maintained its policy rate at 3.00% and the interest rates on its overnight lending and deposit facilities at 3.50% and 2.50%, respectively, during its monetary policy meeting on 22 June.
Consumer prices in Hong Kong, China rose 2.0% y-o-y in May, which was unchanged from April. The government noted that consumer price inflation is expected to remain moderate in the coming months due to benign external price pressures and slowly rising local costs. In Malaysia, the growth of consumer prices slowed to 3.9% y-o-y in May. Inflation was largely driven by higher transport prices, which grew 3.1% y-o-y on higher fuel costs. Singapore’s consumer prices rose 1.4% y-o-y in May, primarily due to the base effects resutling from the disbursement of Service and Conservancy Charges.
Japan’s exports rose 14.9% y-o-y to JPY5.9 trillion in May from JPY5.1 trillion a year earlier. Imports increased at a faster pace of 17.8% y-o-y to JPY6.1 trillion from JPY5.1 trillion over the same period. A trade deficit of JPY203.4 billion was recorded in May.
The Philippines’ balance of payments deficit increased to USD994 million in Q1 2017 from USD210 million in Q1 2016. The current account registered a deficit of USD318 million in Q1 2017, a reversal from the surplus of USD730 million in Q1 2016.
On 20 June, Morgan Stanley Capital International, a leading provider of global equity indexes, announced that it will include the People’s Republic of China’s (PRC) A-share large-cap stocks in its Emerging Markets Index and All-Country World Index by June 2018.
An arrangment known as Bond Connect was made between the PRC and Hong Kong, China allowing investors to trade bonds in each other’s interbank markets as a further step toward deepening the bond markets of both economies. The rules issued by the People’s Bank of China for Bond Connect took effect on 21 June.
Local currency government bond yields fell for most tenors in the PRC, Hong Kong, China, Thailand, and Viet Nam while yields fell for all tenors in Singapore. Yields for most tenors rose in Indonesia and Malaysia. On the other hand, yield movements were mixed in the Republic of Korea and the Philippines. Yield spreads between the 2-year and 10-year tenors narrowed in all markets except in the PRC and Malaysia.