Key Developments in Asian Local Currency Markets

Issue: 16 December 2019

On 11 December, the United States Federal Open Market Committee (FOMC) decided to keep the target range for the federal funds rate steady at between 1.50% and 1.75%. The decision was taken on account of strong labor market statistics and moderate economic growth. The FOMC noted that household spending remained strong. However, business fixed investment and exports were still weak. Also, inflation remained below the 2.0% target. The FOMC kept its gross domestic product (GDP) and inflation projections unchanged from its estimates in September. Unemployment rate projections were revised downward to 3.6% in 2019 and 3.5% in 2020 from 3.7% each in September. Core Personal Consumption Expenditure inflation for 2019 was also revised down to 1.6% from 1.8% in the September projection.

At its last monetary policy board meeting in 2019, the Bangko Sentral ng Pilipinas decided to leave its key interest rates unchanged. The rates for the overnight reverse repurchase facility, overnight deposit facility, and overnight lending facility were maintained at 4.0%, 3.5%, and 4.5%, respectively. The decision was supported by the benign inflation environment, with forecasts for 2020 and 2021 remaining within the target range of 2.0%–4.0%.

Consumer prices in the People’s Republic of China (PRC) rose 4.5% year-on-year (y-o-y) in November after gaining 3.8% y-o-y in October, driven largely by an increase in the prices of food, tobacco, and liquor, which rose 13.9% y-o-y. Rising pork prices continue to drive the increase in food inflation.

Last week, Japan revised its GDP growth estimate for the third quarter (Q3) of 2019 upward to an annual rate of 1.8% from a previously reported 0.2%. The upward adjustment in GDP was due to better domestic demand, with growth in Q3 2019 revised from 0.2% quarter-on-quarter (q-o-q) to 0.6% q-o-q. Public demand was also slightly revised upward to 0.7% q-o-q from 0.6% q-o-q.

Based on provisional data, Hong Kong, China’s industrial production among manufacturing industries inched up 0.4% y-o-y in Q3 2019, the same rate posted in the previous quarter. Malaysia’s Industrial Production Index expanded 0.3% y-o-y in October, easing from the 1.7% y-o-y growth posted in September.

In October, the Philippines’ exports marginally rose 0.1% y-o-y to USD6.3 billion, while imports declined 10.8% y-o-y to USD9.6 billion. A trade deficit of USD3.3 billion was reported in October.

On 11 December, S&P Global Ratings revised its outlook on Thailand’s sovereign credit rating to positive from stable. The positive outlook was based on reduced political risks following the return of an elected government and expectations of modest economic growth amid easing global trade tensions. The ratings agency also affirmed its BBB+ long-term and A-2 short-term foreign currency sovereign credit ratings, as well as its A– long-term and A-2 short-term local currency ratings for Thailand.

The 16 December issue of the Weekly Debt Highlights is the last issue for 2019. Issuance will resume on 13 January 2020.

Last week, yields rose for all tenors in Hong Kong, China; and for most tenors in Indonesia, Malaysia, Singapore, Thailand and Viet Nam. Yield fell for most tenors in the PRC, the Republic of Korea, and the Philippines. The 2-year versus 10-year yield spread narrowed in the PRC; Hong Kong, China; the Republic of Korea; and the Philippines; and widened in the remaining markets.

Key Developments in Asian Local Currency Markets

Issue: 09 December 2019

The Republic of Korea’s gross domestic product grew 0.4% quarter-on-quarter (q-o-q) in the third quarter (Q3) of 2019, down from the 1.0% q-o-q growth posted in the second quarter (Q2). On the production side, the slowdown was mainly due to contractions of 13.6% q-o-q and 4.9% q-o-q, respectively, in electricity, gas, and water supply, and in construction. The declines reversed growth rates of 10.7% q-o-q and 1.6% q-o-q, respectively, in the previous quarter. Services registered slower growth of 0.6% q-o-q in Q3 2019 versus 0.8% q-o-q in Q2 2019. On the other hand, agriculture, forestry, and fishing output rebounded, and there was faster growth in manufacturing in Q3 2019 than in Q2 2019. On the consumption side, growth of final consumption expenditure eased, while gross fixed capital formation contracted after expanding in the prior quarter. On an annual basis, the Republic of Korea’s economy grew 2.0% year-on-year (y-o-y) in Q3 2019.

Prices of basic goods and services in the Republic of Korea rose 0.2% y-o-y in November after remaining unchanged in October. Excluding food and energy items, consumer price inflation in the Republic of Korea expanded 0.5% y-o-y. Prices of basic goods and services in the Philippines increased 1.3% y-o-y in November, accelerating from the 0.8% y-o-y gain recorded in October. Thailand’s consumer price inflation quickened slighlty to 0.2% y-o-y in November from 0.1% y-o-y in October, driven by subdued deflationary pressure from oil prices.

Malaysia posted a trade surplus of MYR17.3 billion in October, up from the MYR8.3 billion surplus recorded in September, as imports contracted more than exports. Exports were down 6.7% y-o-y from a high base, but this was slower than the decline of 6.8% y-o-y in the previous month. Imports decreased 8.7% y-o-y, a reversal from the 2.4% y-o-y growth posted in the prior month. Imports of intermediate goods, capital goods, and consumption goods were all down in October after increasing in September.

The Republic of Korea’s current account registered a surplus of USD7.83 billion in October, up from USD7.76 billion in September. This was spurred by the increase in primary income to USD1.83 billion from USD1.54 billion in the previous month as investment income jumped.

Last week, the Government of Japan announced JPY26 trillion worth of stimulus measures to support economic growth in the face of weakening exports, natural disasters, and the impact of a recent sales tax increase.

Singapore’s Purchasing Managers Index increased to 49.8 in November from 49.6 in October. The (slowing) decline in the manufacturing industry was supported by the electronics sector, where the subindex increased to 49.7 from 49.3.

Last week, yields in emerging East Asia rose for most tenors in the PRC, Indonesia, the Republic of Korea, Malaysia and Singapore. Yields fell for most tenors in Hong Kong, China; Philippines; Thailand and Viet Nam. The 2-year versus 10-year yield spread fell in Malaysia, Philippines, Singapore and Thailand and rose in the remaining markets.

Key Developments in Asian Local Currency Markets

Issue: 02 December 2019

At its monetary policy meeting on 29 November, the Bank of Korea decided to leave the base rate unchanged at 1.25%, following a 25-basis-points cut in October. The Bank of Korea noted the continued slowdown in global economic growth due to the decline in global trade. At the same time, global financial markets have been stable amid the slight easing of trade tensions between the People’s Republic of China (PRC) and the United States (US). Meanwhile, domestic economic growth remained slow, due to weak consumption growth, and is expected to be around 2.0% for full-year 2019 and less than 2.0% in full-year 2020. Annual inflation fell to zero in November but is expected to moderately rise to 1.0% in 2020.

Prices of basic goods and services in Singapore increased 0.4% year-on-year (y-o-y) in October, down from the 0.5% y-o-y growth recorded in September, due to a more rapid decline in the cost of electricity and gas, and slower increase in services costs. In Viet Nam, consumer prices climbed 3.5% y-o-y in November after rising 2.2% y-o-y in October.

The Index of All-Industry Production in the Republic of Korea declined 0.5% y-o-y in October, following minimal growth of 0.5% y-o-y in September. The main driver of the decline was the 2.5% y-o-y contraction in industrial production. On a month-on-month (m-o-m) basis, industrial production in the Republic of Korea fell 0.4% in October. In Singapore, output in the manufacturing sector increased 4.0% y-o-y in October. On a m-o-m seasonally adjusted basis, growth in manufacturing output moderated to 3.4% in October. In Viet Nam, industrial production growth plummeted to 5.4% y-o-y in November from 9.2% y-o-y in the previous month. On a m-o-m basis, however, industrial production contracted 1.6%.

Hong Kong, China’s merchandise exports dropped 9.2% y-o-y and imports fell 11.5% y-o-y in October. Hong Kong, China’s trade deficit narrowed to HKD30.6 billion in October. In Thailand, exports contracted 5.0% y-o-y in October amid a continuing economic slowdown in its major trading partners, a downturn in the electronics cycle, and declining global oil prices. Imports dropped 9.2% y-o-y due to weakened demand for raw materials and intermediate goods. Thailand’s trade surplus narrowed to USD2.1 billion in October. In Viet Nam, exports rose 3.8% y-o-y and imports climbed 4.5% y-o-y in November, resulting in a trade surplus of USD100 million.

The Government of the Philippines posted a budget deficit of PHP49.3 billion in October, which was down from the PHP59.9 billion deficit posted in the same period in 2018. From January to October, the Philippines posted a budget deficit of PHP348.3 billion.

The Government of the PRC priced USD6.0 billion worth of USD-denominated sovereign bonds last week. The 3-year USD1.5 billion bond was priced at a coupon rate of 1.875%, the 5-year USD2.0 billion bond was priced at a coupon rate of 1.95%, and the USD2.0 billion 10-year bond was priced at a coupon rate of 2.125%. The issuance also included a USD500 million 20-year bond priced at a coupon rate of 2.75%.

Last week, local currency government bond yields fell for all tenors in the Republic of Korea and Thailand, and for most maturities in Malaysia, Viet Nam, and Hong Kong, China. Bond yield movements were mixed in the PRC, the Philippines and Singapore, while it edged higher for Indonesia. The spread between the 2-year and 10-year maturities widened for all markets except for Singapore, Thailand, and Hong Kong, China, where the spreads narrowed.

Key Developments in Asian Local Currency Markets

Issue: 25 November 2019

The latest issue of the Asia Bond Monitor, which was published on 20 November, reported that local currency government bond yield trends in emerging East Asian economies were mixed between 31 August and 15 November. Bond yields rose in most markets while declining in a few others, driven primarily by domestic factors in most cases. The report also noted that emerging East Asia's total local currency bonds outstanding reached USD15.2 trillion at the end of September on growth of 3.1% quarter-on-quarter (q-o-q) and 13.0% year-on-year (y-o-y). A copy of the report can be found at https://asianbondsonline.adb.org/abm.php.

The economy of Singapore expanded 0.5% year-on-year in the third quarter (Q3) of 2019, extending the growth of 0.2% y-o-y posted in the second quarter of 2019. The expansion was mainly due to growth in the construction sector of 2.9% y-o-y. On a q-o-q seasonally adjusted annualized basis, Singapore's economy grew 2.1%. Meanwhile, Thailand's gross domestic product rose 2.4% y-o-y in Q3 2019, buoyed primarily by investment and government spending. On a q-o-q seasonally adjusted basis, Thailand's economy grew a marginal 0.1% in Q3 2019, down from 0.4% in the previous quarter.

During its meeting on 20–21 November, the board of governors of Bank Indonesia decided to keep the policy rate unchanged but reduced the reserve requirement ratio for banks to boost liquidity in the financial system and stimulate economic growth. The central bank held the 7-day reverse repo rate at 5.00%, the deposit facility rate at 4.25%, and the lending facility rate at 5.75%.

Hong Kong, China's consumer price inflation in October was down slightly to 3.1% y-o-y from 3.2% y-o-y in September. On a month-on-month seasonally adjusted basis, consumer price inflation averaged 0.2% from August to October. Prices of basic goods and services in Japan increased 0.2% y-o-y in October, the same pace of growth as in September. Japan's core inflation, which excludes food prices, accelerated to 0.4% y-o-y in October from 0.3% y-o-y in the prior month. Likewise, prices of basic goods and services in Malaysia increased 1.1% y-o-y in October, the same pace as in the previous month. Malaysia's core inflation, which excludes prices of volatile items of fresh food and administered prices of goods and services, jumped 1.4% y-o-y.

Japan posted a trade surplus of JPY17.3 billion in October, reversing the deficit of JPY124.8 billion posted in September, as imports fell faster than exports. Meanwhile, Singapore's non-oil domestic exports fell 12.3% y-o-y in October, accelerating from a contraction of 8.1% y-o-y in September. The sharp decline was mainly due to high base effects.

The Republic of Korea's Producer Price Index continued to decline in October, albeit at a slower pace of 0.6% y-o-y versus 0.8% y-o-y in September. On a month-on-month basis, the Producer Price Index declined 0.2% in October.

The Philippines posted a balance-of-payments surplus of USD163.0 million in October, a reversal from the USD458.0 million deficit registered in October 2018.

Last week, local currency government bond yields declined for most tenors for most emerging East Asian economies. Bond yields for most tenors increased for Indonesia and Viet Nam, while they decreased for all tenors in Hong Kong, China. Yield spreads between the 2-year and 10-year tenors contracted for most economies except for the Philippines and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 18 November 2019

In Hong Kong, China, final figures showed that gross domestic product (GDP) contracted 2.9% year-on-year (y-o-y) in the third quarter (Q3) of 2019, following tepid 0.4% y-o-y growth in the second quarter (Q2). In seasonally adjusted quarter-on-quarter (q-o-q) terms, Hong Kong, China’s GDP contracted 3.2% q-o-q in Q3 2019 following a 0.5% q-o-q drop in Q2 2019. Japan’s GDP growth rate decelerated to an annualized rate of 0.2% in Q3 2019 from 1.8% annualized growth in Q2 2019. While nearly all major GDP categories showed weaker growth in Q3 2019 than in the previous quarter, the biggest decline was in exports due to the impact of ongoing trade tensions. In Malaysia, GDP growth eased to 4.4% y-o-y in Q3 2019 from 4.9% y-o-y in Q2 2019. Production in the services, manufacturing, and agriculture sectors slowed to 5.9% y-o-y, 3.6% y-o-y, and 3.7% y-o-y, respectively.

Last week, the Monetary Board of the Bangko Sentral ng Pilipinas decided to leave its key interest rates unchanged, supported by the benign inflation outlook and solid economic growth prospects. The rates for the overnight reverse repurchase facility, overnight deposit facility, and overnight lending facility were maintained at 4.0%, 3.5%, and 4.5%, respectively.

Japan posted a current account surplus of JPY1,612.9 in September, down from August’s JPY2,157.7 billion surplus. The smaller surplus was due mostly to a decline in the primary income account. Malaysia’s current account surplus narrowed to MYR11.5 billion in Q3 2019 from MYR14.3 billion in Q2 2019 due to larger deficits in the primary and secondary income accounts.

Indonesia’s exports and imports continued to contract in October. Exports fell 6.1% y-o-y in October to USD14.9 billion, while imports declined 16.4% y-o-y to USD14.8 billion. A trade surplus of USD0.2 billion was recorded in October.

The Index of Industrial Production in Malaysia increased 1.7% y-o-y in September, the same pace of growth as in the previous month. The decline in the mining industry was offset by increased production in the manufacturing and electricity industries. The People’s Republic of China’s industrial production growth rate fell to 4.7% y-o-y in October from 5.8% y-o-y in September as all three major industrial sectors posted smaller y-o-y increases.

The PRC’s retail sales grew 7.2% y-o-y in October after rising 7.8% y-o-y in September. In Singapore, retail sales fell 2.2% y-o-y to USD3.5 billion in September after declining 4.1% y-o-y in August.

Personal remittances from overseas Filipinos grew 6.3% y-o-y to reach USD2.6 billion in September from USD2.5 billion in September 2018.

WATCH OUT: The upcoming issue of the Asia Bond Monitor will be released on 20 November, and will be available for download on the AsianBondsOnline website. The corresponding launch event will be held at the Securities and Exchange Commission of Cambodia in Phnom Penh.

Yields fell for most tenors in the PRC, Malaysia, Singapore, and Viet Nam. Yields rose for most tenors in Hong Kong, China; Indonesia; Philippines; and Thailand. Meanwhile, yield movements were mixed in the Republic of Korea. The 2-year versus 10-year yield spread narrowed for all markets except in Malaysia, Philippines, Thailand, and Viet Nam. In Hong Kong, China, the spread between the 2-year and 10-year yields remained negative.

Key Developments in Asian Local Currency Markets

Issue: 11 November 2019

Last week, the Bank of Thailand cut its policy rate, while Bank Negara Malaysia (BNM) held its key rate steady. On 6 November, the Monetary Policy Committee of the Bank of Thailand cut its policy rate by 25 basis points (bps) to 1.25% to boost the sluggish economy and lift inflation toward the target range. The rate cut was also viewed by market observers as a measure to stem the Thai baht's appreciation. In a meeting held on 4–5 November, the BNM's monetary policy committee maintained its overnight policy rate at 3.00%. The decision came amid low inflation and economic growth falling within expectations. On 8 November, the BNM also announced that it would cut the statutory reserve requirement ratio from 3.5% to 3.0%, effective 16 November. The reduction in the statutory reserve requirement ratio was made to maintain sufficient liquidity in the financial system.

Real gross domestic product (GDP) growth in Indonesia was broadly unchanged at 5.02% year-on-year (y-o-y) in the third quarter (Q3) of 2019 versus 5.05% y-o-y in the second quarter (Q2). The slightly lower GDP growth in Q3 2019 resulted from weak investment and a slowdown in government spending compared with Q2 2019. In the Philippines, real GDP growth accelerated to 6.2% y-o-y in Q3 2019 from 5.5% y-o-y in Q2 2019. The faster growth was a result of increased government spending following approval of the 2019 budget.

The Purchasing Managers Index (PMI) of Singapore improved to 49.6 in October from 49.5 in September. A PMI below 50 signifies contraction of the manufacturing sector, while a value above 50 reflects expansion.

Consumer price inflation in the Philippines eased to 0.8% y-o-y in October from 0.9% y-o-y in September. Food and nonalcoholic beverage prices continued to contract 0.9% y-o-y in October, the same pace as in September. Year-to-date average inflation stood at 2.6% y-o-y through October, which was still within the government's target range for the year.

Exports from the People's Republic of China (PRC) fell 0.9% y-o-y and imports fell 6.4% y-o-y in October. The PRC posted a trade surplus of USD42.8 billion for October. In Malaysia, the trade surplus decreased to MYR8.3 billion in September, as exports declined to 6.8% y-o-y while imports increased 2.4% y-o-y. In the Philippines, exports declined 2.6% y-o-y in September and imports fell 10.5% y-o-y. The Philippines posted a USD3.1 billion trade deficit in September.

Indonesia's current account deficit narrowed to USD7.7 billion (equivalent to 2.7% of GDP) in Q3 2019 from USD8.2 billion (equivalent to 2.9% of GDP) in Q2 2019. In the Republic of Korea, the current account surplus widened to USD7.5 billion in September from USD5.3 billion in August.

Last week, S&P Global Ratings affirmed its AA long-term and A-1+ short-term foreign and local currency sovereign credit ratings for the Republic of Korea, assigning a stable outlook to each.

The PRC last week sold EUR4.0 billion worth of multitranche bonds. The EUR-denominated bonds were in high demand, with total orders reaching nearly five times the issue amount.

Local currency government bond yields edged higher for most maturities in most emerging East Asian markets last week. The exceptions to the rising trend in yields were Indonesia, Malaysia, and the Philippines, where yields mostly declined. The spread between the 2-year and 10-year maturities widened for all markets in emerging East Asia except for Hong Kong, China.

Key Developments in Asian Local Currency Markets

Issue: 04 November 2019

The United States (US) Federal Reserve, during its 29–30 October monetary policy meeting, reduced its key policy target range by 25 basis points to 1.5%–1.75%. The Federal Reserve noted that labor markets remain strong, but business fixed investment and exports remained weak. The Federal Reserve said that its decision to cut was made in consideration of the global economic environment; while it expects the US economy to continue on its path, uncertainty remains. The Federal Reserve removed from its statement a previous reference to “act as appropriate to sustain the expansion.” Market participants largely viewed this as a signal that the Federal Reserve would hold off any further changes in its policy rate target unless there is a change in its outlook.

On 31 October, the Hong Kong Monetary Authority reduced its base rate 25 bps to 2.0%, a move that was in lockstep with the rate cut announced by the Federal Reserve as required by the local currency’s peg to the US dollar. During its 30–31 October monetary policy meeting, the Bank of Japan left unchanged the key short-term policy rate at 0.10% and the 10-year target yield for Japanese Government Bonds at zero.

In October, consumer price inflation remained unchanged in the Republic of Korea, slowed in Indonesia and Thailand, and rose in Viet Nam. The Republic of Korea’s Consumer Price Index was unchanged in October following a 0.4% year-on-year (y-o-y) contraction in September. Indonesia’s inflation eased to 3.1% y-o-y in October from 3.4% y-o-y in September. In Thailand, inflation slowed to 0.1% y-o-y in October from 0.3% y-o-y in September, which was still below the Bank of Thailand’s target. Viet Nam’s inflation rose to 2.2% y-o-y in October from 2.0% y-o-y in September.

Based on advanced estimates, Hong Kong, China’ gross domestic product (GDP) contracted 2.9% y-o-y in the third quarter (Q3) of 2019. In quarter-on-quarter (q-o-q) seasonally adjusted terms, Hong Kong, China’s GDP contracted 3.2% q-o-q in Q3 2019 following a 0.5% q-o-q drop in the previous quarter. The two consecutive quarters of negative growth indicated that the economy had fallen into a technical recession after months of social unrest.

Industrial production growth in Viet Nam eased to 9.2% y-o-y in October from 10.2% y-o-y in September. The People’s Republic of China’s (PRC) manufacturing Purchasing Managers Index continued to decelerate, falling to 49.3 in October from 49.8 in September. In the Republic of Korea, the Index of All-Industry Production inched up 0.5% y-o-y in September after remaining unchanged in August.

In September, Thailand’s exports contracted 1.5% y-o-y, while imports dropped 4.5% y-o-y, resulting in a trade surplus of USD2.7 billion. In October, the Republic of Korea’s exports fell 14.7% y-o-y, while imports declined 14.6% y-o-y, posting a trade surplus of USD5.4 billion.

Last week, local currency bond yields rose for all tenors in the PRC and Singapore and for most tenors in the Republic of Korea, and Thailand. In contrast, yields dropped for all tenors in Viet Nam and for most tenors in Hong Kong, China; Indonesia and Malaysia. Yield movements were mixed in the Philippines. The 2-year versus 10-year spread widened for all markets except the PRC, Malaysia, and the Philippines. The negative spread between the 2- and 10-year yields widened in Hong Kong, China.

Key Developments in Asian Local Currency Markets

Issue: 28 October 2019

In a meeting held on 23–24 October, the Board of Governors of Bank Indonesia decided to reduce rates by 25 basis points for the fourth consecutive month, bringing the 7-day reverse repurchase rate to 5.00%, Corresponding adjustments were also made to the deposit facility rate (4.25%) and the lending facility rate (5.75%). Bank Indonesia’s policy rates have been cut a cumulative 100 basis points between July and October.

The Republic of Korea’s real gross domestic product growth eased to 0.4% quarter-on-quarter (q-o-q) in the third quarter (Q3) of 2019 from 1.0% q-o-q in the second quarter (Q2), based on advance estimates from the Bank of Korea. The lower growth was driven by the contraction in gross fixed capital formation, which declined 2.3% q-o-q in Q3 2019, a reversal from the 0.6% q-o-q growth posted in Q2 2019. In addition, final consumption expenditure growth eased in both the public and private sectors. On a year-on-year (y-o-y) basis, the Republic of Korea’s economy grew 2.0% in Q3 2019, the same pace recorded in Q2 2019.

Hong Kong, China’s consumer price inflation eased to 3.2% y-o-y in September from 3.5% y-o-y in August. After netting out the effects of the government’s one-off relief measures, composite inflation eased to 3.2% y-o-y in September from 3.4% y-o-y in August. In Malaysia, inflation eased to 1.1% y-o-y in September from 1.5% y-o-y in August as most components of the Consumer Price Index rose at a slower pace than in the previous month. In Singapore, inflation was unchanged at 0.5% y-o-y in September. Core inflation, which excludes private road transport and accommodation prices, also eased to 0.7% y-o-y from 0.8% y-o-y in the previous month.

Hong Kong, China’s merchandise exports continued their downtrend in September, falling 7.3% y-o-y after a 6.3% y-o-y contraction in August. Imports also fell 10.3% y-o-y in September, marking 10 straight months of contraction. Hong Kong, China’s trade deficit widened to HKD31.6 billion in September from HKD28.0 billion in August. Japan’s exports continued to decline in September, falling 5.2% y-o-y to JPY6,386.5 billion; imports also shrank, falling 1.5% y-o-y to JPY6,491.5 billion. Japan posted a trade deficit of JPY123.0 billion in September.

Singapore’s manufacturing output increased 0.1% y-o-y in September, rebounding from a decline of 6.4% y-o-y in August. On a seasonally adjusted month-on-month basis, Singapore’s manufacturing output rose 3.7%.

The Government of the Philippines posted a budget deficit of PHP178.6 billion in September, an 85.5% y-o-y increase from the PHP96.2 billion deficit registered in September 2018. The jump in the deficit was due to higher public spending, which rose 39.0% y-o-y, as the government ramped up implementation of its expenditure plan following delayed passage of the 2019 budget. Revenue collections increased 16.9% y-o-y in Q3 2019 to PHP236.5 billion, although this was down from PHP279.9 billion in the previous quarter.

Yields fell for all tenors in Singapore; and for most tenors in Indonesia, Philippines, and Viet Nam. Yields rose for all tenors in the Republic of Korea, and for most tenors in the PRC; Hong Kong, China; and Malaysia. Meanwhile, yield movements were mixed in Thailand. The 2-year versus 10-year yield spread widened for all markets except in the Philippines and Thailand. In Hong Kong, China, the spread between the 2-year and 10-year yields remained negative.

Key Developments in Asian Local Currency Markets

Issue: 21 October 2019

During its monetary policy meeting on 14 October, the Monetary Authority of Singapore reduced slightly the appreciation rate of the Singapore dollar nominal effective exchange rate policy band. The width and center of the policy band were unchanged. The decision came amid the economy growing below its potential and core inflation remaining low. At its monetary policy meeting on 16 October, the Bank of Korea decided to cut its base rate by another 25 basis points to 1.25%, following a cut of 25 basis points in July. The Bank of Korea noted the slowdown in global economic growth due to the decline in global trade.

The People’s Republic of China’s (PRC) gross domestic product expanded 6.0% year-on-year (y-o-y) in the third quarter of 2019, down from 6.2% y-o-y growth in the second quarter of 2019. Meanwhile, advance estimates showed that the economy of Singapore expanded 0.1% y-o-y in the third quarter of 2019, the same growth rate recorded in the second quarter of 2019, despite all sectors performing worse than in the previous quarter. On a quarter-on-quarter seasonally adjusted annualized basis, Singapore’s economy grew 0.6%, rebounding from the 2.7% contraction in the second quarter of 2019.

Consumer price inflation in the PRC accelerated to 3.0% y-o-y in September from 2.8% y-o-y in August. The uptick in inflation was mostly due to rising food prices, which gained 8.4% y-o-y in September after rising 7.3% y-o-y in the previous month. Prices of basic goods and services in Japan increased 0.2% y-o-y in September, slightly lower than the 0.3% y-o-y growth recorded in August. On a month-on-month (m-o-m) seasonally adjusted basis, Japan’s consumer prices were unchanged in September.

The PRC’s trade activities continued to contract in September, led by an 8.5% y-o-y decline in imports after a contraction of 5.6% y-o-y in August. Exports also fell, declining 3.2% y-o-y in September after contracting 1.0% y-o-y in August. Indonesia posted a trade deficit of USD160.5 million in September, a turnaround from the USD112.4 million trade surplus recorded in August. Meanwhile, Singapore’s non-oil domestic exports declined 8.1% y-o-y in September, an improvement from the decrease of 9.0% y-o-y in August, as the decline in electronic and non-electronic domestic exports slowed.

Industrial production in the PRC grew 5.6% y-o-y in the first 9 months of 2019. In Japan, the Index of Industrial Production declined 4.7% y-o-y in August, a reversal from the growth of 0.7% y-o-y recorded in July. On a m-o-m seasonally adjusted basis, Japan’s Index of Industrial Production decreased 1.2% in August after growing 1.3% in the previous month.

Net foreign flows into the Republic of Korea’s local currency bond market slightly fell to KRW1.4 trillion in September from KRW1.7 trillion in August. Net foreign flows for the first 9 months of 2019 reached KRW13.4 trillion in September.

Personal remittances from overseas Filipinos reached USD2.9 billion in August on 4.2% y-o-y growth from the USD2.8 billion registered in August 2018. For the first 8 months of 2019, the aggregate remittances totaled USD22.0 billion, up 3.6% y-o-y from the same period in 2018.

Last week, local currency government bond yields increased for most tenors for most emerging East Asian economies. Bond yields for most tenors declined for Hong Kong, China and the Philippines, while they decreased for all tenors in Indonesia and Viet Nam. Government bond yields for all tenors moved up in the Republic of Korea. Yield spreads between the 2-year and 10-year tenors expanded for most economies except for Indonesia and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 14 October 2019

In September, consumer price inflation decelerated in Indonesia, the Republic of Korea, the Philippines, Thailand, and Viet Nam. Indonesia's headline inflation slowed to 3.4% year-on-year (y-o-y) in September from 3.5% y-o-y in August due to declining food prices. The Republic of Korea's consumer price inflation was negative in September, with prices falling 0.4% y-o-y after posting zero inflation in August. Inflation in the Philippines decelerated to 0.9% y-o-y in September from 1.7% y-o-y in August—the lowest rate in almost 3 years—mainly because of deflation in food and nonalcoholic beverage prices. Thailand's headline inflation slowed to 0.3% y-o-y in September from 0.5% y-o-y in August, falling below the Bank of Thailand's target range of 1.0%–4.0% y-o-y for a fourth straight month. Consumer price inflation in Viet Nam eased to 2.0% y-o-y in September from 2.3% y-o-y in August due to declining prices in most consumer price index groups.

Viet Nam's economy continued to post robust growth despite the global economic slowdown, with gross domestic product expanding 7.0% y-o-y in the first 9 months of the year, up from 6.8% y-o-y in the same 9-month period a year earlier. Growth was largely driven by the industry and construction sectors, which grew 9.4% y-o-y, and the services sector, which rose 6.9% y-o-y during the review period.

The Republic of Korea's industrial production growth continued to slow in August, with the growth rate for the Index of All-Industry Production falling to 0.2% y-o-y from 0.7% y-o-y in July due to contractions in manufacturing and construction. Viet Nam's industrial production continued to expand in September, rising 10.2% y-o-y after a 10.5% y-o-y growth in August.

Singapore's manufacturing activity was mostly unchanged in August, with the Purchasing Managers Index rising marginally to 49.9 from 49.8 in July.

Exports from both Malaysia and Thailand contracted in August. Malaysia's export growth declined 0.8% y-o-y in August, following 1.7% y-o-y growth in July, due to contractions in electronic products, crude petroleum, and liquefied natural gas. Thailand's merchandise exports fell 2.1% y-o-y in August, reversing the 3.8% y-o-y growth in July, amid weak global demand.

In September, the Republic of Korea's export slump continued while Viet Nam sustained its positive trade performance. The Republic of Korea's exports fell 11.7% y-o-y in September after a 13.6% y-o-y drop in August amid ongoing trade tensions between the People's Republic of China (PRC) and the United States, as well as its own trade issues with Japan. In contrast, Viet Nam's export growth surged to 9.0% y-o-y in September from 4.5% y-o-y rise in August.

Thailand posted a current account surplus of USD4.0 billion in August, up from USD1.8 billion in July. The overall balance-of-payments surplus stood at USD1.2 billion in August, down from USD4.5 billion in the previous month.

Last week, local currency yields fell for all tenors in the Republic of Korea and Singapore, and for most tenors in Indonesia, Malaysia, and the Philippines. Yield movements were mixed in the PRC; Hong Kong, China; Thailand; and Viet Nam. Yield spreads between the 2- and 10-year tenors narrowed in most markets in emerging East Asia except for Hong Kong, China; the Republic of Korea; and the Philippines.

Key Developments in Asian Local Currency Markets

Issue: 07 October 2019

In September, consumer price inflation decelerated in Indonesia, the Republic of Korea, the Philippines, Thailand, and Viet Nam. Indonesia's headline inflation slowed to 3.4% year-on-year (y-o-y) in September from 3.5% y-o-y in August due to declining food prices. The Republic of Korea's consumer price inflation was negative in September, with prices falling 0.4% y-o-y after posting zero inflation in August. Inflation in the Philippines decelerated to 0.9% y-o-y in September from 1.7% y-o-y in August—the lowest rate in almost 3 years—mainly because of deflation in food and nonalcoholic beverage prices. Thailand's headline inflation slowed to 0.3% y-o-y in September from 0.5% y-o-y in August, falling below the Bank of Thailand's target range of 1.0%–4.0% y-o-y for a fourth straight month. Consumer price inflation in Viet Nam eased to 2.0% y-o-y in September from 2.3% y-o-y in August due to declining prices in most consumer price index groups.

Viet Nam's economy continued to post robust growth despite the global economic slowdown, with gross domestic product expanding 7.0% y-o-y in the first 9 months of the year, up from 6.8% y-o-y in the same 9-month period a year earlier. Growth was largely driven by the industry and construction sectors, which grew 9.4% y-o-y, and the services sector, which rose 6.9% y-o-y during the review period.

The Republic of Korea's industrial production growth continued to slow in August, with the growth rate for the Index of All-Industry Production falling to 0.2% y-o-y from 0.7% y-o-y in July due to contractions in manufacturing and construction. Viet Nam's industrial production continued to expand in September, rising 10.2% y-o-y after a 10.5% y-o-y growth in August.

Singapore's manufacturing activity was mostly unchanged in August, with the Purchasing Managers Index rising marginally to 49.9 from 49.8 in July.

Exports from both Malaysia and Thailand contracted in August. Malaysia's export growth declined 0.8% y-o-y in August, following 1.7% y-o-y growth in July, due to contractions in electronic products, crude petroleum, and liquefied natural gas. Thailand's merchandise exports fell 2.1% y-o-y in August, reversing the 3.8% y-o-y growth in July, amid weak global demand.

In September, the Republic of Korea's export slump continued while Viet Nam sustained its positive trade performance. The Republic of Korea's exports fell 11.7% y-o-y in September after a 13.6% y-o-y drop in August amid ongoing trade tensions between the People's Republic of China (PRC) and the United States, as well as its own trade issues with Japan. In contrast, Viet Nam's export growth surged to 9.0% y-o-y in September from 4.5% y-o-y rise in August.

Thailand posted a current account surplus of USD4.0 billion in August, up from USD1.8 billion in July. The overall balance-of-payments surplus stood at USD1.2 billion in August, down from USD4.5 billion in the previous month.

Last week, local currency yields fell for all tenors in the Republic of Korea and Singapore, and for most tenors in Indonesia, Malaysia, and the Philippines. Yield movements were mixed in the PRC; Hong Kong, China; Thailand; and Viet Nam. Yield spreads between the 2- and 10-year tenors narrowed in most markets in emerging East Asia except for Hong Kong, China; the Republic of Korea; and the Philippines.

Key Developments in Asian Local Currency Markets

Issue: 30 September 2019

At its recent monetary policy meeting, the Bangko Sentral ng Pilipinas cut key interest rates by 25 basis points, reducing the overnight reverse repurchase rate to 4.00% and interest rates for the overnight deposit and lending facilities to 3.50% and 4.50%, respectively. The cuts were made on account of easing inflation and represented the central bank's third series of rate reductions in 2019. The Bank of Thailand kept its benchmark interest rate unchanged at 1.50% to boost economic growth and help raise inflation toward the central bank's target range. Last month, the Bank of Thailand reduced its policy rate by 25 basis points, its first reduction since 2015.

Prices of basic goods and services in Malaysia rose 1.5% year-on-year (y-o-y) in August, up from the 1.4% y-o-y growth recorded in July, owing to price increases for a number of prime commodities. Malaysia's core inflation, which excludes fresh food and administered prices of goods and services, remained unchanged in August at 2.0% y-o-y. Price inflation for basic goods and services in Singapore rose to 0.5% y-o-y in August from 0.4% y-o-y in July on account of higher costs of private road transport and a smaller decline in accommodation costs. Excluding these commodities, Singapore's core inflation rose 0.8% y-o-y in August, the same rate of growth as in July.

Output in Singapore's manufacturing sector contracted 8.0% y-o-y in August, extending the 0.1% y-o-y decline posted in July. On a seasonally adjusted month-on-month basis, Singapore's manufacturing output contracted 7.5% in August, a reversal from the 3.6% expansion in July.

Hong Kong, China's exports continued to decline in August, falling 6.3% y-o-y after a 5.7% y-o-y decrease in July, as exports to Asia and other major destinations weakened on account of a slowdown in global economic growth exacerbated by ongoing trade tensions between the United States and the People's Republic of China. Imports fell 11.1% y-o-y, following an 8.7% y-o-y decline in July, owing to double-digit declines in imports of many principal commodities. As imports fell faster than exports, Hong Kong, China's trade deficit narrowed to HKD28.0 billion in August from HKD52.1 billion in July.

The People's Republic of China's current account surplus narrowed to USD46.2 billion in August from USD49.0 billion in July on account of a USD11.9 billion deficit in primary income. Hong Kong, China posted an overall balance of payments surplus of HKD28.3 billion in Q2 2019, down from the HKD33.0 billion surplus recorded in the previous quarter due to deficits in the financial and capital accounts.

The Philippines posted a marginally smaller budget deficit of PHP2.5 billion in August, versus PHP2.6 billion deficit in August 2018, as revenues rose at a faster pace than expenditures. Revenues in August rose 8.9% y-o-y to PHP279.7 billion on increased collections by the Bureau of Internal Revenue and the Bureau of Customs, which rose 11.1% y-o-y and 3.0% y-o-y, respectively. Expenditures rose 8.8% y-o-y to PHP282.2 billion in August. For the first 8 months of 2018, the Philippines incurred a budget deficit of PHP120.4 billion.

Last week, local currency yields rose for most tenors in the People's Republic of China; Hong Kong, China; Indonesia; Singapore; and Viet Nam, and fell for most tenors in the Republic of Korea; Malaysia; the Philippines and Thailand. Yield spread between the 2- and 10-year tenors narrowed in Malaysia, the Philippines, Singapore, Thailand and Viet Nam, and widened in the People's Republic of China; Hong Kong, China; Indonesia and the Republic of Korea.

Key Developments in Asian Local Currency Markets

Issue: 23 September 2019

The latest issue of the Asia Bond Monitor, which was published on 18 September, reported that local currency government bond yields fell in most emerging East Asian economies between 1 June and 15 August amid a subdued outlook for global economic growth, easing monetary policy stances, and increased investor risk aversion. The report also noted that emerging East Asia's local currency bond market reached a size of USD15.3 trillion at the end of June on growth of 3.5% quarter-on-quarter and 14.2% year-on-year (y-o-y). A copy of the report can be found at https://asianbondsonline.adb.org/abm.php.

On 18 September, the Federal Open Market Committee of the United States Federal Reserve decided to lower the target range of the federal funds rate to 1.75%-2.00% from 2.00%-2.25%. The decision came amid signs of a strong economy and inflation remaining in line with expectations.

On 19 September, the Hong Kong Monetary Authority lowered its base rate by 25 basis points to 2.25%, matching a similar cut by the United States Federal Reserve. Likewise, on 18-19 September, Bank Indonesia further reduced its policy rates by 25 basis points, marking the third consecutive month the central bank eased its monetary policy. On the other hand, the Bank of Japan, during its 18-19 September monetary policy meeting, left its monetary policy stance unchanged. It kept the monetary policy rate-the short-term interest rate target-at -0.1% and the 10-year Japanese Government Bond yield target at zero, with some room for fluctuation.

Growth in Hong Kong, China's Composite Consumer Price Index accelerated to 3.5% y-o-y in August from 3.3% y-o-y in July. After netting out the effects of the government's one-off relief measures, composite inflation rose to 3.4% y-o-y in August from 3.2% y-o-y in July. Japan's consumer price inflation fell to 0.3% y-o-y in August from 0.5% y-o-y in July due to slower food and energy price increases. Japan's consumer price inflation excluding fresh food prices fell to 0.5% y-o-y from 0.6% y-o-y in the same period.

Exports growth in Indonesia continued to slump, falling 10.0% y-o-y in August after declining 5.1% y-o-y in July. In the same period, imports declined 15.6% y-o-y after dipping 15.2% y-o-y in the previous month. A trade surplus of USD85.1 million was recorded in August, reversing the trade deficit of USD64.3 million in July. In Singapore, non-oil domestic exports contracted 8.9% y-o-y in August, which was slower than the 11.4% y-o-y decline recorded in July, due to an easing decline in non-electronics exports.

The People's Republic of China's industrial production growth rate decelerated to 4.4% y-o-y in August from 4.8% y-o-y in July. By major sector, the fastest decline was in mining and quarrying activities, with the growth rate falling to 3.7% y-o-y in August from 6.6% y-o-y in July.

The Philippines posted a balance of payments surplus of USD493.0 million in August, led by inflows into the government's net foreign currency deposits and income from the Bangko Sentral ng Pilipinas' investments abroad. For the first 8 months of 2019, the Philippines posted a surplus of USD5.5 billion.

Last week, local currency government bond yields increased for most tenors for most emerging East Asian economies except for Indonesia, Singapore, and Thailand where most tenors declined. Yield spreads between the 2-year and 10-year tenors expanded for most economies except for the Republic of Korea, Singapore, Thailand, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 16 September 2019

The European Central Bank (ECB) decided to ease monetary policy during its 12 September meeting, reducing its key policy rate target and unveiling a new asset purchase program. The ECB reduced its key policy rate, the deposit facility rate, by 10 basis points (bps) to -0.50%. It also adjusted its forward rate guidance, saying that it would keep the policy rate at its current level or lower until the inflation outlook moved closer to the 2.0% target. In addition, the ECB restarted its asset purchase program, announcing that it would purchase EUR20 billion worth of securities every month starting on 1 November and running for as long as needed. The ECB downgraded its forecast for gross domestic product growth to 1.1% year-on-year (y-o-y) for 2019 from a June forecast of 1.2% y-o-y. The euro area's inflation forecast for full-year 2019 was revised downward to 1.2% y-o-y from 1.3% y-o-y; for full-year 2020 it was lowered to 1.0% y-o-y from 1.4% y-o-y.

The People's Republic of China's (PRC) consumer prices rose 2.8% y-o-y in August, the same rate as in July. Producer prices, on the other hand, declined 0.8% y-o-y in August after contracting 0.3% y-o-y in July.

Japan reported a downward revision of its gross domestic product growth for the second quarter (Q2) of 2019 to an annualized rate of 1.3% from a previous estimate of 1.8%. The revision was mostly due to a decline in the estimate for annualized growth in private nonresidential investment to 0.8% from 6.1%.

The monetary policy committee of Bank Negara Malaysia decided to keep the overnight policy rate at 3.0% during its meeting on 12 September. Last week the State Bank of Vietnam announced a 25 basis point reduction in key policy rates with effect on 16 September to support economic growth. The refinancing rate was lowered to 6.00%, the rediscount rate to 4.00%, and the overnight lending rate to 7.00%. The State Bank of Vietnam took note of rising global risks that led a number of central banks, including the US Federal Reserve and the ECB, to cut rates and adopt an easing monetary policy stance.

The PRC's exports fell 1.0% y-o-y in August after rising 3.3% y-o-y in July. Imports continued to decline, falling 5.6% y-o-y in August, the same pace as in July. The PRC's trade surplus narrowed to USD34.8 billion from USD45.1 billion during the same period. Exports from the Philippines rose 3.5% y-o-y in July to USD6.2 billion, while imports fell 4.2% y-o-y to USD9.6 billion. The Philippines posted a trade deficit of USD3.4 billion in July.

Japan's current account surplus widened to JPY2.0 trillion in July from JPY1.2 trillion in June.

Based on provisional data, Hong Kong, China's industrial production growth slowed to 0.3% y-o-y in Q2 2019 from 1.4% y-o-y in the previous quarter. Malaysia's Index of Industrial Production grew 1.2% y-o-y in July, easing from the expansion of 3.9% y-o-y recorded in June.

The Republic of Korea's local currency bond market registered net foreign inflows amounting to KRW1.7 trillion in August, reversing the KRW421 billion of net outflows posted in July.

Retail sales in Singapore declined 1.8% y-o-y in July, which was an improvement from the 8.9% y-o-y contraction in June.

Yields rose for all tenors in the Philippines and Singapore; and for most tenors in the PRC, Malaysia, and Thailand. Yields fell for all tenors in Indonesia and Vietnam, and for most tenors in the Republic of Korea. Yield movements were mixed in Hong Kong, China. The 2-year versus 10-year yield spread rose for all markets except in Hong Kong, China; Indonesia; and Malaysia.

Key Developments in Asian Local Currency Markets

Issue: 09 September 2019

Consumer price inflation decelerated in the Philippines and in Thailand in August, while it rose in Indonesia and was unchanged in the Republic of Korea. In the Philippines, consumer price inflation decelerated to 1.7% year-on-year (y-o-y) in August from 2.4% y-o-y in July as five out of eleven commodity groups posted slower annual increases. In Thailand, consumer price inflation dropped to 0.5% y-o-y in August from 1.0% in July, mainly driven by a slower increase in food prices and a steeper decline in transportation costs. In contrast, consumer prices rose in Indonesia, with inflation accelerating to 3.5% y-o-y in August from 3.3% y-o-y in July as all major inflation expenditure groups posted price increases. In the Republic of Korea, consumer prices were unchanged in August from its year ago level after rising 0.6% y-o-y in July.

The Republic of Korea's gross domestic product growth for the second quarter of 2019 was revised downward to 2.0% y-o-y from an advance estimate of 2.1% y-o-y, which was still an improvement from the 1.7% y-o-y growth posted in the first quarter of 2019. The downward revision was driven by slower growth in government consumption expenditure of 7.0% y-o-y, compared with an advance estimate of 7.3% y-o-y, and in exports of 1.2% y-o-y, compared with 1.5% y-o-y. On a quarter-on-quarter basis, the Republic of Korea's economy grew 1.0%, down from an advanced estimate of 1.1%.

The Purchasing Managers Index (PMI) of Singapore marginally increased to 49.9 in August from 49.8 in July. A reading below 50 indicates contraction in the manufacturing sector, while a value above 50 signifies expansion.

Malaysia's trade surplus in July increased to MYR14.3 billion from MYR10.3 billion in June. Malaysia's exports jumped 1.7% y-o-y in July, rebounding from the decline of 3.4% y-o-y in the previous month, while imports declined 5.9% y-o-y, which was slower than the 9.8% y-o-y contraction posted in June.

The Republic of Korea's current account surplus widened to USD6.9 billion in July from USD6.4 billion in June. The larger surplus was driven by the higher primary income account surplus of USD3.0 billion in July versus USD2.8 billion in the previous month. The goods account surplus slightly narrowed to USD6.2 billion in July from USD6.3 billion in June, as imports rose at a faster pace than exports on a month-on-month basis. From January to July, the Republic of Korea posted a current account surplus of USD28.7 billion.

On 5 September, Fitch Ratings Inc. downgraded Hong Kong, China's issuer default rating after months of antigovernment protests. Hong Kong, China's long-term currency issuer default rating was downgraded one notch to AA from AA+ and given a negative outlook.

Last week, local currency government bond yields mostly fell in the People's Republic of China; Hong Kong, China; Indonesia; and Viet Nam. On the other hand, yields rose for all maturities in the Republic of Korea and for most maturities in the Philippines and Thailand. Yield movements were mixed in Malaysia and Singapore. The spread between the 2-year and 10-year maturities widened for all emerging East Asian markets except for Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 02 September 2019

At its monetary policy meeting on 30 August, the Bank of Korea decided to keep its base rate unchanged at 1.50% on account of the slowdown in global economic growth and heightened volatility in global financial markets due to trade tensions. On the domestic front, economic growth slowed on weakening consumption and is expected to remain on the same trajectory due largely to the trade dispute between the United States and the People's Republic of China (PRC), as well as geopolitical risks. Inflation remained subdued and is expected to be between zero and 0.5% in 2019 and 1.0%–1.5% in 2020.

Consumer prices in Viet Nam rose 0.3% year-on-year (y-o-y) in August, which was slightly faster than the 0.2% y-o-y increase in July. Prices for most commodities rose during the period, led by medicine and health care registering inflation of 2.8% y-o-y, and education at 0.6% y-o-y.

Japan's industrial production rose 1.3% month-on-month (m-o-m) in July, following a decline of 3.3% m-o-m in the previous month, driven by large gains in business-oriented machinery, which grew 8.6% m-o-m, and other products, which grew 6.5% m-o-m. The Index of All-Industry Production in the Republic of Korea slightly rebounded in July, posting marginal growth of 0.5% y-o-y after an 0.8% y-o-y contraction in June. Singapore's manufacturing output declined 0.4% y-o-y in July, easing from a contraction of 8.1% y-o-y in June, supported by growth in general manufacturing and chemicals output and a more moderate contraction in electronics and transport engineering. Viet Nam's Index of Industrial Production expanded 10.5% y-o-y in August, driven by output growth in the mining and quarrying and manufacturing sectors.

Hong Kong, China's merchandise trade continued to slump amid weakening global demand and the escalating trade dispute between the PRC and the United States. Exports fell 5.7% y-o-y in July, marking 9 straight months of contraction. Thailand's exports rose 3.8% y-o-y to USD21.0 billion in July, reversing the 2.1% y-o-y contraction in June. Imports rebounded in July, posting 0.9% y-o-y growth to reach USD19.3 billion in July versus the 9.6% y-o-y decline recorded in the previous month. Viet Nam's export growth decelerated to 4.5% y-o-y in August from 9.3% y-o-y in July. In contrast, imports expanded at a faster pace of 7.5% y-o-y in August compared with 5.0% y-o-y in the previous month.

Thailand's balance of payments recorded a surplus of USD4.5 billion in July, up from USD1.9 billion in June. The current account surplus narrowed to USD1.8 billion from USD3.9 billion in the previous month due to a narrowing of the merchandise trade surplus, which outpaced the recovery in the services, primary, and secondary income account.

Last week, local currency yields fell for most tenors in Hong Kong, China; the Philippines; Singapore; and Thailand; and fell for all tenors in Malaysia. Yields rose for most tenors in Indonesia, the Republic of Korea and Viet Nam while mixed yield movements were seen in the PRC. Yield spreads between the 2-year and 10-year tenor narrowed in most markets, and widened in Hong Kong, China; Indonesia and the Republic of Korea.

Key Developments in Asian Local Currency Markets

Issue: 26 August 2019

In its meeting on 21-22 August, Bank Indonesia's Board of Governors decided to reduce the 7-day reverse repurchase rate by 25 basis points (bps) to 5.50%. This marked the second consecutive month the central bank loosened monetary policy, resulting in a cumulative rate cut of 50 bps this year. Bank Indonesia raised rates six times in 2018 by a cumulative 175 bps to stabilize the Indonesian rupiah. The decision to lower the policy rate for a second straight month was deemed appropriate given the low-inflation environment and the need to spur economic growth.

Thailand's gross domestic product growth slowed to 2.3% year-on-year (y-o-y) in the second quarter of 2019 from 2.8% y-o-y in the previous quarter, amid a continuing slowdown in domestic and external demand. The agriculture sector contracted 1.1% y-o-y, while the nonagricultural sector expanded 2.6% y-o-y in the second quarter of 2019. The growth in the latter was driven primarily by the services sector, which expanded 3.5% y-o-y. In contrast, manufacturing production contracted 0.2% y-o-y, due to a decline in export-oriented sectors such as computers, rubber, and plastic products.

In July, inflation remained unchanged at 3.3% y-o-y in Hong Kong, China, while it eased to 0.5% y-o-y in Japan and 0.4% y-o-y in Singapore. In Hong Kong, China, the faster increase in food prices, which was due to disruptions in the supply of pork, was offset by a slower rise in the cost of tour packages. Meanwhile, the lower inflation in Singapore stemmed from lower costs of services, retail and other goods, and electricity and gas. In Japan, weaker inflation was driven by a slower increase in food prices.

The Republic of Korea's Producer Price Index declined 0.3% y-o-y in July, a reversal from the 0.1% y-o-y growth posted in June. The contraction was driven by a continued decline in the agriculture, forestry, and marine products, and manufacturing subindices. On a month-on-month basis, the Republic of Korea's Producer Price Index was unchanged.

The Philippines posted a balance-of-payments surplus of USD248 million in July, a reversal from the USD455 million deficit posted in the same month in 2018. For the first 7 months of the year, the Philippines posted a cumulative surplus of USD5.0 billion, driven by overseas Filipino remittances and net inflows from foreign direct investment.

The Government of the Philippines posted a budget deficit of PHP75.3 billion in July, down from the PHP86.4 billion deficit posted in the same month in 2018, as revenues rose at a faster pace than expenditures.

Malaysia's international reserves stood at USD103.1 billion in the middle of August, which was equivalent to 7.6 months' worth of retained imports. The Philippines' July gross international reserves amounted to USD85.2 billion at the end of July, sufficient to cover 7.4 months' worth of imports and payments of services and primary income.

Last week, local currency bond yield movements were mixed in most markets in emerging East Asia. In the Republic of Korea, Malaysia, the Philippines, and Singapore, yields dropped for shorter-dated tenors but rose for longer-dated tenors. Yields increased for most tenors in the People's Republic of China, but declined for most tenors in Hong Kong, China and Indonesia. Yields rose for all tenors in Thailand, but fell for all tenors in Viet Nam. The spread between the 2- and 10-year tenors widened for all markets except Indonesia.

Key Developments in Asian Local Currency Markets

Issue: 19 August 2019

Malaysia's economy, as measured by its gross domestic product, expanded 4.9% year-on-year (y-o-y) in the second quarter (Q2) of 2019, up from growth of 4.5% y-o-y in the first quarter (Q1) of 2019. All sectors of the economy recorded positive growth. However, it was manufacturing, construction, and mining and quarrying that contributed most to the faster growth. On the other hand, Hong Kong, China's economy grew 0.5% y-o-y in Q2 2019, down slightly from 0.6% y-o-y in Q1 2019. Likewise, Singapore's economy grew 0.1% y-o-y in Q2 2019 after posting 1.1% y-o-y growth in Q1 2019. The easing growth was due to declines in the manufacturing sector and the wholesale and retail trade sector.

Prices of basic goods and services in Malaysia rose 1.4% y-o-y in July, lower than the 1.5% y-o-y consumer price inflation recorded in June. A slower increase in the prices of housing, water, electricity, gas, and other fuels contributed to the easing inflation. Growth of recreation services and culture costs also eased, while prices of clothing and footwear posted a larger decline.

The People's Republic of China's industrial production growth rate decelerated to 4.8% y-o-y in July from 6.3% y-o-y in June. All three major industrial production categories showed lower y-o-y growth rates in July. Japan reported a revised industrial production growth rate of -3.3% month-on-month (m-o-m) in June, reversing the 2.0% m-o-m growth in the previous month. By subsector, the largest decline came from the information and communications electronics equipment sector.

Indonesia recorded a trade deficit of USD63.5 million in July after posting a trade surplus of USD297.3 million in June. Exports declined 5.1% y-o-y following a drop of 8.9% y-o-y in the previous month. Imports fell 15.2% y-o-y in July after expanding 2.0% y-o-y in the previous month. Singapore's non-oil domestic exports declined at a slower pace in July, decreasing 11.2% y-o-y after falling 17.4% y-o-y in the previous month. Electronic and nonelectronic exports continued to contract. On an m-o-m seasonally adjusted basis, Singapore's non-oil domestic exports expanded 3.7% in July.

Malaysia registered a current account surplus of MYR14.3 billion in Q2 2019, narrowing from a surplus of MYR16.4 billion in the previous quarter due to the performance of goods and services.

Foreign flows into the Republic of Korea's local currency bond market were negative in July, totaling KRW421 billion in outflows, following 2 consecutive months of large net inflows. Year-to-date cumulative bond inflows reached USD10.5 trillion through the end of July.

In the Philippines, personal remittances from overseas Filipinos reached USD16.3 billion year-to-date through the end of June, a 2.9% y-o-y increase from the USD15.8 billion registered in the same period in 2018. However, for the month of June, personal remittances declined 2.7% y-o-y to USD2.5 billion.

Last week, local currency government bond yields decreased for most tenors for most emerging East Asia economies. Most tenors increased for Hong Kong, China and Indonesia, while all tenors declined for the Republic of Korea and Viet Nam. Meanwhile, local currency government bond yields were mixed for the Philippines. Yield spreads between the 2-year and 10-year tenors contracted for most economies except for the People's Republic of China and Indonesia.

Key Developments in Asian Local Currency Markets

Issue: 12 August 2019

Real gross domestic product (GDP) growth in Indonesia was 5.05% year-on-year (y-o-y) in the second quarter (Q2) of 2019, buoyed by domestic consumption and broadly unchanged from 5.07% y-o-y in the first quarter (Q1). Japan's GDP expanded at an annual rate of 1.8% y-o-y in Q2 2019 after gaining 2.8% y-o-y in Q1 2019. By sector, gains were noted in private consumption and business investment. Real GDP growth in the Philippines slightly eased to 5.5% y-o-y in Q2 2019 from 5.6% y-o-y in Q1 2019. By type of expenditure, all categories posted slower annual growth rates in Q2 2019 except for investment, which declined during the quarter.

Last week, the Bangko Sentral ng Pilipinas cut the interest rate on its overnight reverse repurchase facility by 25 basis points to 4.25%. The interest rates for the overnight deposit and lending facilities were also reduced to 3.75% and 4.75%, respectively. On 7 August, the Monetary Policy Committee of the Bank of Thailand cut its policy rate by 25 basis points to 1.5%.

Consumer prices in the People's Republic of China (PRC) rose 2.8% y-o-y in July after gaining 2.7% y-o-y in June, due to an acceleration in food price inflation. The PRC's producer prices posted deflation of 0.3% y-o-y in July after remaining unchanged in June. Consumer price inflation in the Philippines eased to 2.4% y-o-y in July from 2.7% y-o-y in June as 5 out of 11 commodity groups posted slower annual price increases, led by the deceleration in price increases for food and nonalcoholic beverages to 1.9% y-o-y in July from 2.7% y-o-y in June.

The PRC's export performance recovered in July, with exports gaining 3.3% y-o-y in July after declining 1.3% y-o-y in June. Imports also improved somewhat by declining at a slower pace of –5.6% y-o-y in July versus –7.4% y-o-y in June. The PRC reported a trade surplus of USD45.1 billion in July. The Philippines' exports rose 1.5% y-o-y in June to USD6.0 billion, while imports fell 10.4% y-o-y to USD8.5 billion, due to the decline in imports of the top 10 major commodities, resulting in a trade deficit of USD2.5 billion in June.

The Republic of Korea's current account surplus widened to USD6.4 billion in June from USD4.8 billion in May. The larger surplus was driven by a rise in the goods account surplus to USD6.3 billion in June from USD5.5 billion in May as imports fell at a faster monthly pace than exports.

The Index of Industrial Production of Malaysia expanded 3.9% y-o-y in June, down from growth of 4.0% y-o-y recorded in May. The easing growth can be attributed to a slowdown in the electricity and manufacturing sectors.

Fitch Ratings last week affirmed its AA– rating for the Republic of Korea's long-term foreign currency issuer default rating, with a stable outlook, citing the Republic of Korea's robust external finances, steady macroeconomic performance, and sound fiscal management amid geopolitical risks.

Yields fell for all tenors in the Republic of Korea, Malaysia and the Philippines and for most tenors in the remaining emerging East Asia markets except Viet Nam, as central banks in the region such as Philippines and Thailand eased monetary policy. The 2-year versus 10-year yield spread fell for all markets except in the Republic of Korea and the Philippines.

Key Developments in Asian Local Currency Markets

Issue: 05 August 2019

The United States Federal Reserve last week reduced its key policy rate target range by 25 basis points (bps) to 2.00%-2.25%. In its decision, the Federal Reserve said that while economic activity continues to rise and labor markets remain strong, the reduction was prompted by a weaker global outlook and minimal domestic inflationary pressures, which have led to heightened uncertainties. In addition, the Federal Reserve said that it would end its balance sheet reduction program, 2 months earlier than its previous indication, which was at the end of September.

On 1 August, the Hong Kong Monetary Authority lowered its base rate by 25 bps to 2.50%, following the 25-bps cut in the target range for the federal funds rate announced by the Federal Reserve. During its monetary policy meeting on 30 July, the Bank of Japan kept its key policy rate at -0.1%.

Consumer price inflation in Indonesia was 3.3% year-on-year (y-o-y) in July, roughly the same level as in the prior month. In Thailand, inflation rose marginally to 1.0% y-o-y in July from 0.9% y-o-y in June, driven by elevated food prices. In Viet Nam, consumer price inflation climbed to 2.4% y-o-y in July from 2.2% y-o-y in June, as 9 out of 11 major inflation subindexes posted price increases. Consumer price inflation in the Republic of Korea eased to 0.6% y-o-y in July from 0.7% y-o-y in June, primarily due to the deceleration in price increases in food and nonalcoholic beverages.

Based on preliminary data, Hong Kong, China's gross domestic product grew 0.6% y-o-y in the second quarter of 2019, the same growth rate posted in the first quarter. In quarter-on-quarter seasonally adjusted terms, gross domestic product contracted 0.3% in the second quarter of 2019, reversing the 1.3% quarter-on-quarter expansion recorded in the previous quarter.

The Republic of Korea's exports fell 11.0% y-o-y to USD46.1 billion in July; imports also declined 2.7% y-o-y to USD43.7 billion. The Republic of Korea posted a trade surplus of USD2.4 billion. Malaysia's trade surplus expanded to MYR10.3 billion in June from MYR9.1 billion in May as imports declined faster than exports. Exports fell 3.1% y-o-y in June, while imports were down 9.2% y-o-y. Thailand's exports continued to contract in June, dropping 2.1% y-o-y; imports shrunk considerably in June, falling 9.6% y-o-y. This resulted in an expansion of the trade surplus to USD4.4 billion. Exports from Viet Nam gained 9.3% y-o-y in July to reach USD22.6 billion, and import growth moderated to 5.0% y-o-y for a total of USD22.4 billion, resulting in a trade surplus of USD0.2 billion in July.

Thailand posted a current account surplus of USD3.9 billion in June, reversing the USD0.4 billion deficit recorded in May.

On a seasonally adjusted month-on-month basis, Japan's preliminary industrial production fell 3.6% in June after gaining 2.0% in May. In the Republic of Korea, the Index of All-Industry Production declined 1.1% y-o-y in June, a reversal from the 1.2% y-o-y growth posted in the previous month. Industrial production growth in Viet Nam inched up to 9.7% y-o-y in July from 9.6% y-o-y in June.

Last week, local currency bond yields declined for most all tenors in the Republic of Korea and the Philippines; and for most tenors in the PRC, Malaysia, Singapore, Thailand and Viet Nam. Yields rose for all tenors in Indonesia; and for most tenors in Hong Kong, China. The spread between the 2-year and 10-year tenors narrowed for all economies except in Hong Kong, China; Indonesia; and the Philippines.

Key Developments in Asian Local Currency Markets

Issue: 29 July 2019

During its 25 July monetary policy meeting, the European Central Bank's (ECB) President, Mario Draghi, hinted that the bank would unveil additional stimulus measures in its next monetary policy meeting to be held in September. While the ECB left its current monetary policy unchanged, Draghi noted that the global outlook has become increasingly uncertain. As a result, the ECB is now reviewing possible stimulus measures should the euro area's inflation outlook fall below its target, such as strengthening forward guidance on policy rates and additional asset purchases.

Based on advance estimates by the Bank of Korea, gross domestic product in the Republic of Korea rose to 2.1% year-on-year (y-o-y) in the second quarter (Q2) of 2019 from 1.7% y-o-y in the previous quarter on account of higher growth in both private and government consumption. Exports rebounded from negative growth in the previous quarter and gross domestic capital formation posted a slower decline, together contributing to the more rapid expansion of the domestic economy.

Consumer price inflation in Malaysia accelerated to 1.5% y-o-y in June from 0.2% y-o-y growth in May, influenced by a high base effect caused by the removal of the Goods and Services Tax in June 2018. Consumer price inflation in Hong Kong, China reached 3.3% y-o-y in June, marking the highest inflation recorded since August 2016. Consumer price inflation in Singapore rose 0.6% y-o-y in June, easing from a 0.9% y-o-y increase in May on a deceleration of price increases in private road transport, services, and retail, and the continued decline in costs of electricity and gas, and accommodations.

Singapore's manufacturing output has trended downward since February, falling 6.9% y-o-y in June after a 2.0% y-o-y decline in May. The contraction in the manufacturing sector was spurred by further declines in electronics production and a reversal in growth of the transport engineering and chemicals clusters.

Hong Kong, China's exports contracted 9.0% y-o-y to HKD309.6 billion, dropping for an eighth straight month amid softening global demand and continued trade tensions between the United States and the People's Republic of China (PRC). Total exports to Asia declined, dragged down by weakened shipments to major trading partners in the region. Imports dipped 7.5% y-o-y to HDK364.8 billion in June following a 4.3% y-o-y drop in May. Hong Kong's trade deficit widened to HKD55.2 billion in June from HKD34.7 billion in May.

The Philippines posted a budget deficit of PHP41.8 billion in June, narrowing 22.9% y-o-y from the PHP54.3 billion deficit from a year earlier, driven by a rise in revenues from higher tax collections and a decline in expenditures. For the first half of 2019, the Philippines incurred a budget deficit of PHP42.6 billion, a large decline from the PHP193.0 billion deficit registered in the same period in 2018.

Last week, local currency government bond yields rose for most tenors in most markets in Indonesia, Thailand, Viet Nam, the PRC, and Hong Kong, China; while yields fell for all tenors in the Philippines and the Republic of Korea; and for most tenors in Malaysia and Singapore. Yield gap between the 2-year and 10-year tenors expanded in the Philippines, Indonesia, Singapore and the PRC, but narrowed in all other markets.

Key Developments in Asian Local Currency Markets

Issue: 22 July 2019

The People's Republic of China's (PRC) gross domestic product (GDP) growth rate slowed to 6.2% year-on-year (y-o-y) in the second quarter (Q2) of 2019 from 6.4% y-o-y in the first quarter (Q1). The slower growth was attributed to weaker performance in secondary industry, which expanded 5.6% y-o-y in Q2 2019 after growing 6.1% y-o-y in the previous quarter. Growth in primary industry accelerated to 3.3% y-o-y from 2.7% y-o-y during the review period, while growth in tertiary industry was unchanged at 7.0% y-o-y.

During their respective monetary policy meetings held last week, Bank Indonesia and the Bank of Korea each decided to cut their policy rates by 25 basis points. Bank Indonesia reduced the 7-day reverse repurchase rate to 5.75%, maintaining an accommodative policy stance to boost economic growth given low inflation expectations. The Bank of Korea likewise lowered its base rate to 1.50% amid moderating domestic economic growth and low inflation, noting that it will continue its accommodative stance to support economic growth recovery and maintain stable inflation.

The PRC's industrial production growth accelerated to 6.3% y-o-y in June from 5.0% y-o-y in May, driven by improved growth in its major industrial sectors including mining and quarrying, manufacturing, and high-technology.

Japan's consumer price inflation remained unchanged in June at 0.7% y-o-y. Core consumer price inflation (excluding fresh food but including oil prices) declined to 0.6% y-o-y in June from 0.8% y-o-y in May.

June data showed that Indonesia's exports dropped 9.0% y-o-y to USD11,779.8 million, while imports grew 2.8% y-o-y to USD11,583.8 million, resulting in a trade surplus of USD196.0 million. In Japan, exports fell 6.7% y-o-y to JPY6.5 trillion and imports contracted 5.2% y-o-y to JPY6.0 trillion, resulting in a trade surplus of JPY589.5 billion. Singapore's non-oil domestic exports declined 17.3% y-o-y in June, driven by declines in electronic and nonelectronic exports.

In the Philippines, personal remittances from overseas Filipinos grew 5.5% y-o-y in May to USD2.9 billion. The United States; Saudi Arabia; Singapore; United Arab Emirates; United Kingdom; Japan; Canada; Hong Kong, China; Qatar; and Kuwait remained the top sources of remittances.

On 18 July, Fitch Ratings affirmed Malaysia's long-term foreign currency issuer default rating at A– with a stable outlook based on the country's strong medium-term growth prospects and diversified export base.

Foreign net inflows into the Republic of Korea's local currency bond market declined to KRW5.8 trillion in June from KRW7.1 trillion in May. Year-to-date cumulative bond inflows reached KRW10.9 trillion.

Cagamas, the National Mortgage Corporation of Malaysia, priced MYR1.0 billion worth of conventional notes and paper last week, comprising MYR700.0 million of 1-year medium term notes, MYR200.0 million of 3-month commercial paper, and MYR100.0 million of 1-year floating rate medium-term notes.

Last week, local currency bond yields declined for most tenors for the majority of the emerging East Asian Markets. Yield movements were mixed in Hong Kong, China; Malaysia, and Singapore. The spread between the 2-year and 10-year tenors widened in the PRC, Hong Kong, China, Indonesia, Philippines and Viet Nam while it contracted for the rest of the economies.

Key Developments in Asian Local Currency Markets

Issue: 15 July 2019

Consumer price inflation in the Philippines eased to 2.7% year-on-year (y-o-y) in June from 3.2% y-o-y in May as six out of eleven commodity groups posted slower annual price increases. The slower inflation was primarily due to a slower price increase for food and nonalcoholic beverages. In Thailand, consumer price inflation moderated to 0.9% y-o-y in June from 1.2% y-o-y in May, which was attributed to declining inflation for nonfood items such as energy and transportation and communications. Core inflation, which excludes volatile energy and food prices, rose 0.5% y-o-y in June. Consumer price inflation in Indonesia rose 3.3% y-o-y for the second month in a row in June, largely due to a faster increase in food prices. On a month-on-month (m-o-m) basis, inflation slipped to 0.6% in June from 0.7% in the prior month. In the Republic of Korea, consumer price inflation was unchanged at 0.7% y-o-y in June from the previous month. On a m-o-m basis, consumer prices in the Republic of Korea declined 0.2% in June.

Singapore's Purchasing Managers Index (PMI) declined to 49.6 in June from 49.9 in May. This was the lowest PMI since August 2016. The electronics sector, a key component of the PMI, contracted in June, hitting the 49.2 level from 49.4 in the previous month. This marked the eighth consecutive monthly contraction for the electronics sector.

Malaysia posted a trade surplus of MYR9.1 billion in May, down from the MYR10.9 billion trade surplus logged in the previous month. Exports from Malaysia increased 2.5% y-o-y in May, while imports edged up 1.4% y-o-y. On the other hand, the Republic of Korea posted a trade surplus of USD4.2 billion in June as exports fell 13.5% y-o-y and imports declined 11.1% y-o-y.

The Republic of Korea posted a USD5.0 billion current account surplus in May, a reversal from the USD0.7 billion deficit posted in April. The goods account surplus slightly narrowed to USD5.4 billion as exports declined and imports rose on a m-o-m basis. The services account and secondary income account continued to post deficits.

Last week, the Ministry of Finance of the People's Republic of China sold a CNY1.7 billion 3-year bond in Macau, China. In addition, a CNY0.3 billion 2-year bond will be offered to retail investors from 5 July to 19 July.

The Bank of Thailand trimmed its supply of short-term (3-month, 6-month, and 1-year) bonds in July in a move viewed by market observers as an effort to slow capital inflows and curb the baht's appreciation.

Last week, local currency government bond yields rose for most tenors in Indonesia, Thailand, Viet Nam, the PRC, and Hong Kong, China; while yields fell for all tenors in the Philippines and the Republic of Korea; and for most tenors in Malaysia and Singapore. Yield gap between the 2-year and 10-year tenors expanded in the Philippines, Indonesia, Singapore and the PRC, but narrowed in all other markets in emerging East Asia.

Key Developments in Asian Local Currency Markets

Issue: 08 July 2019

Based on advance estimates, real gross domestic product growth in Singapore eased to 0.1% year-on-year (y-o-y) in the second quarter (Q2) of 2019, lower than the 1.1% y-o-y growth recorded in the first quarter (Q1) of 2019. The slowdown in economic growth stemmed from weak growth in the construction sector and the continued decline in the manufacturing sector. Growth in the construction industry moderated to 2.2% y-o-y, which was slower than the 2.7% y-o-y increase in Q1 2019. The manufacturing sector continued to contract, falling 3.8% y-o-y after declining 0.4% y-o-y in Q1 2019, due to the contraction in electronics and precision engineering clusters. Services producing industries grew 1.2% y-o-y, the same level of growth in the previous quarter. On a quarter-on-quarter seasonally adjusted annualized basis, Singapore's economy contracted 3.4% in Q2 2019, reversing the 3.8% expansion posted in the prior quarter.

Industrial production growth in Japan contracted for the fourth straight month in May, falling 2.1% y-o-y after declining 1.1% y-o-y in April. In Malaysia, industrial production expanded 4.0% y-o-y in May, the same growth rate recorded in April as higher growth in the mining sector was slightly offset by the slower growth in manufacturing and electricity.

The monetary policy committee of Bank Negara Malaysia decided to keep the overnight policy rate at its current level of 3.00%. The monetary policy committee stated that the current policy rate remains accommodative and supportive of the economy's sustainable growth and price stability.

Consumer price inflation in the People's Republic of China (PRC) stayed at 2.7% y-o-y, for the second month in a row in June. On a month-on-month (m-o-m) basis, a deflation of 0.1% was recorded in June. Producer price inflation in the PRC was unchanged in June from the same period a year ago after rising to 0.6% y-o-y in May. On a m-o-m basis, producer prices declined 0.3% in June. In Japan, the Producer Price Index fell 0.1% y-o-y in June, marking the first decline since December 2016.

The PRC's trade performance weakened in June amid prolonged trade tensions with the United States and slowdown in the global economy. Exports from the PRC contracted 1.3% y-o-y in June and imports declined 7.3% y-o-y. The PRC's trade surplus rose to USD51.0 billion in June. In the Philippines, exports rose 1.0% y-o-y in May to USD6.2 billion while imports fell 5.4% y-o-y to USD9.4 billion. The Philippines posted a trade deficit of USD3.3 billion in May.

Japan's current account surplus fell 15.8% y-o-y in May to JPY1.6 trillion, contracting for a third straight month amid weak exports. Primary income, which stood at JPY2.3 trillion in May, continued to be the main source of Japan's current account surplus. On the other hand, secondary income posted a deficit of JPY0.1 trillion in May. On a seasonally adjusted basis, Japan's current account surplus narrowed 18.4% m-o-m to JPY 1.3 trillion in May from JPY1.6 trillion in April.

Last week, local currency government bond yields fell for all maturities in Viet Nam and for most maturities in the PRC; Hong Kong, China; and Indonesia. On the other hand, yields edged higher for most maturities in Malaysia, the Philippines, and Thailand while it was mixed in the Republic of Korea and Singapore. The spread between the 2-year and 10-year tenors widened for most emerging East Asian markets except for the PRC, Malaysia, and the Philippines.

Key Developments in Asian Local Currency Markets

Issue: 01 July 2019

Gross domestic product (GDP) growth in Viet Nam stood at 6.7% year-on-year (y-o-y) in the second quarter of 2019, a slight moderation from revised 6.8% y-o-y growth in the first quarter. On a year-to-date basis, GDP growth eased to 6.8% y-o-y in the first 6 months of 2019 from 7.1% y-o-y in the same period a year earlier. The industry and construction sector posted the fastest growth at 8.9% y-o-y, although this was down from 9.1% y-o-y growth in the same 6-month period in 2018. Growth in the agriculture, forestry, and fishery sector also slowed to 2.4% y-o-y in the first half of the year from 3.9% y-o-y a year earlier.

The Index of All-Industry Production in the Republic of Korea contracted 0.5% month-on-month (m-o-m) in May, a reversal from the 0.9% m-o-m expansion in April. In Singapore, manufacturing output declined 2.4% y-o-y in May, a reversal from the 0.1% y-o-y expansion in April. In Viet Nam, industrial production growth slipped to 9.6% y-o-y in June from 10.0% y-o-y in May as three out of four major sectors posted slower y-o-y growth in June.

Prices of basic goods and services in Malaysia increased 0.2% y-o-y in May for the second month in a row. In Singapore, consumer prices rose 0.9% y-o-y in May, up slightly from 0.8% y-o-y in April. Consumer price inflation in Viet Nam slipped to 2.2% y-o-y in June from 2.9% y-o-y in May on slower gains in food prices.

On 26 June, the Monetary Policy Committee of the Bank of Thailand voted unanimously to hold the 1-day repurchase rate at 1.75%, while lowering the economic growth forecast for full-year 2019 to 3.3% from an earlier forecast of 3.8%. The central bank also raised concern about the strong baht. The downgraded growth forecast was mainly due to expectations that exports would be dragged down significantly by lower global demand due to ongoing trade tensions between the United States and the People's Republic of China (PRC).

Hong Kong, China's exports fell 2.4% y-o-y in May and imports dropped 4.3% y-o-y amid sluggish global demand. A trade deficit of HKD34.7 billion was reported in May. Exports from Indonesia contracted 9.0% y-o-y in May and imports declined 17.7% y-o-y. A trade surplus amounting to USD208 million was recorded in May. In Thailand, exports fell 7.2% y-o-y and imports dropped 0.2% y-o-y in May. A trade surplus of USD1,403 million was recorded in May. Viet Nam posted a trade surplus of USD400 million in June, as exports rose 8.5% y-o-y and imports grew 10.0% y-o-y.

Last week, Kookmin Bank raised additional Tier 1 capital through the sale of a USD500 million perpetual sustainability bond. The bond was priced at par to yield 4.35%. Proceeds from the issuance will be used for projects under the bank's sustainable financing framework. Last week, Standard Chartered Bank raised SGD750 million from the sale of perpetual callable Singapore dollar bonds that were priced at par to yield 5.375%.

Local currency government bond yields declined in the Philippines and fell for most maturities in Hong Kong, China; Indonesia; Malaysia; and Thailand last week. In contrast, yields rose for all tenors in the Republic of Korea and Singapore, and for most maturities in the PRC and Viet Nam. The spread between the 2- and 10-year tenors widened for most emerging East Asian markets except for the PRC, the Republic of Korea, Thailand, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 24 June 2019

The latest issue of the Asia Bond Monitor, which was published last week, reported that local currency government bond yields in emerging East Asia fell between 1 March and 15 May as global economic growth slowed, central banks in advanced economies halted their monetary policy tightening, and central banks in emerging East Asia turned more accommodative. The report also noted that emerging East Asia's local currency bond market reached a size of USD15.0 trillion at the end of March, maintaining its pace of growth from the fourth quarter of 2018. A copy of the report can be found at /documents/ abm_jun_2019.pdf.

On 19 June, the United States Federal Reserve held interest rates steady but noted that uncertainties regarding the economic outlook have increased. In its statement, the Federal Reserve indicated that it will closely monitor incoming information and act appropriately to sustain economic growth. The following day, the Bank of Japan, Bank Indonesia, and Bangko Sentral ng Pilipinas also decided to keep their policy rates unchanged, while acknowledging the need to monitor risks in the global economy.

Japan's exports dropped 7.8% year-on-year (y-o-y) in May, declining for a sixth straight month. Japan's trade deficit widened to JPY967.1 billion in May.

Singapore's non-oil domestic exports (NODX) dropped 15.9% y-o-y in May. Electronic NODX fell 31.4% y-o-y, while non-electronic NODX dropped 10.8% y-o-y in May.

Consumer price inflation in Hong Kong, China and Japan slowed in May. In Hong Kong, China, consumer price inflation rose 2.8% year-on-year (y-o-y) in May, slightly moderating from a 2.9% y-o-y uptick in April. In Japan, consumer price inflation slowed to 0.7% y-o-y in May from 0.9% y-o-y in April.

Hong Kong, China's current account surplus narrowed to HKD36.6 billion in the first quarter of 2019 from HKD40.4 billion in the fourth quarter of 2018. The Philippines posted a USD928.0 million balance of payments surplus in May, a reversal of the USD583.0 million deficit recorded in April. Inflows came mainly from the government's net foreign currency deposit and proceeds from its foreign currency investments abroad.

Personal remittances from overseas Filipinos grew 3.7% y-o-y in April, which was slower than the 6.4% y-o-y expansion recorded in March.

On 20 June, the Ministry of Finance of the People's Republic of China auctioned two renminbi sovereign bonds through the Central Moneymarkets Unit of the Hong Kong Monetary Authority. One is a 2-year bond worth CNY3.5 billion and carrying a 9.50% coupon; the other is a 5-year bond worth CNY1.0 billion and carrying a 3.03% coupon. The People's Bank of China also announced that CNY20.0 billion worth of 1-month and CNY10.0 billion worth of 6-month renminbi bills will be auctioned through the Central Moneymarkets Unit of the Hong Kong Monetary Authority on 26 June.

Last week, local currency bond yields dropped for all tenors in the Republic of Korea, Malaysia, and the Philippines; and most tenors in Indonesia and Japan, following the decline in US yields. Yield movements were mixed in the PRC; Hong Kong, China; Singapore; Thailand; and Viet Nam. The 2-year versus 10-year spread narrowed in the PRC, Indonesia, Malaysia, the Philippines and Viet Nam, while it widened in Hong Kong, China; the Republic of Korea; Singapore; and Thailand.

Key Developments in Asian Local Currency Markets

Issue: 17 June 2019

Revised figures showed that Japan's gross domestic product grew at an annualized pace of 2.2% in the first quarter of 2019, a tick higher than the initial estimate of 2.1%, and stronger than the growth of 1.8% registered in the fourth quarter of 2018. The expansion stemmed largely from an increase in net exports, which was driven by a 4.6% quarter-on-quarter (q-o-q) drop in imports that outpaced the 2.4% q-o-q fall in exports. Private and public demand both grew during the review period.

Exports from the People's Republic of China (PRC) grew 1.1% year-on-year (y-o-y) in May. In contrast, imports fell 8.5% y-o-y. The lower imports led to a gain in the PRC's trade surplus, which rose to USD41.7 billion in May. The Philippines' trade balance recorded a deficit of USD3.5 billion in April, down from USD3.7 billion in April 2018, as exports grew and imports declined.

The PRC's industrial production grew 5.0% y-o-y in May after rising 5.4% y-o-y in April. For the first 5 months of the year, the PRC's industrial production grew 6.0% y-o-y. Hong Kong, China's industrial production in manufacturing expanded 1.4% y-o-y in the first quarter of 2019, following an increase of 1.2% y-o-y in the fourth quarter of 2018. Malaysia's Industrial Production Index expanded 4.0% y-o-y in April, higher than the 3.1% y-o-y growth recorded in March as all sectors registered growth.

Japan's current account balance registered a surplus of JPY1.7 trillion in April, down from the JPY1.9 trillion surplus posted a year earlier, and the JPY2.8 trillion surplus recorded in the previous month. The narrowing of the current account surplus was driven primarily by a goods and services trade deficit, which stood at JPY0.4 trillion in April, a reversal of the JPY0.1 trillion goods surplus recorded a year earlier.

Consumer price inflation in the PRC accelerated to 2.7% y-o-y in May from 2.5% y-o-y in April. In contrast, the PRC's producer price inflation decelerated to 0.6% y-o-y in May from 0.9% y-o-y in April. Consumer price inflation in Indonesia rose to 3.3% y-o-y in May from 2.8% y-o-y in April on account of faster increases in food prices and transportation costs.

Foreign investors purchased a net KRW7.1 trillion of listed bonds in May compared with KRW0.5 trillion in April. The bond holdings of foreign investors reached KRW119.2 trillion, accounting for 6.7% of total listed bonds.

The Government of Indonesia priced its third issuance of dual-currency bonds, comprising (i) a EUR750 million 7-year bond with a coupon rate of 1.45%, and (ii) a USD750 million 10-year bond with a coupon rate of 3.40%.

WATCH OUT: The upcoming issue of the Asia Bond Monitor will be released on 19 June, and will be available for download on the AsianBondsOnline website.

Last week, local currency government bond yields decreased for most tenors for most economies, while all tenors declined for the Republic of Korea. On the other hand, yields increased for most tenors for the People's Republic of China; Hong Kong, China; and Viet Nam. Yield spreads between the 2-year and 10-year tenors contracted for most economies except for the People's Republic of China, Malaysia, and the Philippines.

Key Developments in Asian Local Currency Markets

Issue: 10 June 2019

In a speech at a conference held at the Federal Reserve Bank of Chicago last week, United States (US) Federal Reserve Chairman Jerome Powell stated that recent developments regarding the trade dispute between the US and the People’s Republic of China, and more recently Mexico, are being closely monitored by the Federal Reserve and their outcome is uncertain. He also mentioned that the Federal Reserve is ready to act in “an appropriate manner to sustain the expansion.” Market participants have interpreted this as a more dovish shift in the US’ monetary policy stance and this has increased speculation that the Federal Reserve may cut interest rates this year.

The Republic of Korea’s gross domestic product grew 1.7% year-on-year (y-o-y) in the first quarter of 2019, moderating from 2.8% y-o-y growth in the same quarter last year. Among industries, electricity, gas, and water supply registered the fastest growth at 6.8% y-o-y, followed by services at 2.3% y-o-y; both growth raes were slower than in the same period in the previous year. Manufacturing slowed due to reduced production of electronics. Construction declined 7.0% y-o-y because of weak private construction.

Consumer price inflation in the Republic of Korea slightly rose to 0.7% y-o-y in April from 0.6% y-o-y in March, primarily due to higher costs of food and nonalcoholic beverages, and hotel and restaurants. Prices of basic goods and services in the Philippines increased 3.2% y-o-y in May, up from the 3.0% y-o-y consumer price inflation recorded in April, due to higher prices of food and nonalcoholic beverages. Thailand’s inflation rose 1.15% y-o-y in May, easing slightly from the 1.23% y-o-y uptick recorded in April, driven primarily by increases in prices of fresh vegetables and fruits.

Malaysia’s trade surplus eased to MYR10.9 billion in April from MYR14.4 billion in March. Exports grew 1.1% y-o-y in March while imports rose 4.4% y-o-y. The Republic of Korea’s exports contracted 9.4% y-o-y to USD45.9 billion in May due to lower export prices amid the intensified trade dispute between the US and the PRC, and the slowing Chinese economy. Imports, likewise, contracted 1.9% y-o-y to USD43.6 billion in May, resulting in a narrowing of the trade surplus to USD2.3 billion in May from USD4.0 billion in April.

The Republic of Korea’s current account registered a deficit of USD0.7 billion in April, a turnaround from the USD1.4 billion surplus posted in the same period a year earlier and from the USD4.8 billion surplus in March.

Singapore’s manufacturing industry contracted for the first time in 32 months as evidenced by a decline in the Purchasing Managers Index to 49.9 in May from 50.3 in April, which was weighed down by the continued contraaction of the electronics cluster.

Hong Kong, China’s foreign reserves amounted to USD437.8 billion at the end of May, expanding from USD436.4 billion at the end of April. The foreign reserves accounted for 45% of the Hong Kong dollar M3 money supply and represented seven times the amount of currency in circulation.

Last week, local currency bond yields fell for all tenors in the Republic of Korea, Malaysia, the Philippines, Singapore, and Vietnam and for most tenors in and Thailand and Hong Kong, China, following the decline in US yields. Yield movements were mixed in the PRC, while there were no market activities in Indonesia due to a week-long Eid-al-Fitr holiday. The 2-year versus 10-year spread narrowed in most markets except for Hong Kong, China; the Republic of Korea, and Singapore.

Key Developments in Asian Local Currency Markets

Issue: 03 June 2019

In a meeting held on 31 May, the Monetary Policy Board of the Bank of Korea kept the base rate steady at 1.75%. The board took note of moderating growth in the global economy and increasing volatility in global financial markets as sources of concern. The board also noted that incoming data suggest that economic growth in the second quarter of 2019 is accelerating from the previous quarter. Current projections show that the domestic economy will grow equal to or at its potential level.

Japan's industrial production rose 0.6% month-on-month (m-o-m), reversing March's 0.6% m-o-m decline. The rise in industrial production was driven by gains in motor vehicles, production machinery, and transport equipment. On a year-on-year (y-o-y) basis, Japan's industrial production fell 1.1%. The Republic of Korea's industrial production fell 0.1% year-on-year (y-o-y) in April versus a 0.5% y-o-y decline in March. Industrial production growth in Viet Nam rose 10.0% y-o-y in May after expanding 9.3% y-o-y in April. All major subindexes recorded faster y-o-y growth in May. The only exception was the mining and quarrying subindex, which contracted 1.5% y-o-y.

Consumer prices in Viet Nam rose 2.9% y-o-y in May, unchanged from April. On a m-o-m basis, inflation rose to 0.5% due largely to an increase in the prices of oil and electricity. Out of 11 consumer price subindexes, nine posted an uptick in prices on a m-o-m basis, led by transportation, which rose 2.6% m-o-m.

Hong Kong, China's exports declined 2.6% y-o-y in April to HKD321.5 billion, down from the 1.2% y-o-y contraction in March. Imports also declined, decelerating 5.5% y-o-y to HKD356.6 billion, from the 0.1% y-o-y contraction in the previous month. In April, Hong Kong, China's trade deficit stood at HKD35.1 billion. Thailand's merchandise exports contracted 2.9% y-o-y to USD18,648 million in April, following the 4.2% y-o-y decline in March. Merchandise imports, likewise, contracted 0.4% y-o-y to USD18,566 million in April, after dipping 5.8% y-o-y in March. Thailand's trade surplus narrowed to USD82 million in April from USD3,584 million in March, which led to a narrowing of the current account surplus to USD1,784 million from USD6,080 million during the same period. Export growth in Viet Nam was unchanged from April at 7.5% y-o-y in May, while import growth moderated to 8.3% y-o-y from 17.6% y-o-y. A trade deficit of USD1.3 billion was recorded in May versus a deficit of USD0.7 billion in April. For the first 5 months of the year, Viet Nam posted a trade deficit of USD548 million.

Provisional estimates for retail sales in April in Hong Kong, China amounted to HKD37.7 billion, down 4.5% y-o-y after a marginal decline of 0.2% y-o-y in March, as sales decreased for a number of retail products during the period, the largest of which was an 11.4% y-o-y decline in sales of jewelry and other valuable gifts. The government noted that retail sales remained weak in April on still-cautious consumption sentiment amid external uncertainties.

Last week, local currency government bond yields fell for all tenors in the Republic of Korea, Malaysia and the Philippines and for most tenors in Singapore, Thailand and Viet Nam, following the decline in US yields. Yield movements were mixed in the PRC; Hong Kong, China and rose for most tenors in Indonesia. The 2-year versus 10-year yield spread fell for most markets, except in the PRC; Hong Kong, China, Indonesia and Malaysia.

Key Developments in Asian Local Currency Markets

Issue: 27 May 2019

Real gross domestic product (GDP) growth in Singapore and Thailand moderated in the first quarter (Q1) of 2019, while it accelerated in Japan. Economic growth in Singapore eased to 1.2% year-on-year (y-o-y) in Q1 2019 from 1.3% y-o-y in the fourth quarter (Q4) of 2018. The slower growth can be attributed to declines in manufacturing and in the wholesale and retail trade sectors. On a quarter-on-quarter (q-o-q) seasonally adjusted annualized basis, Singapore's economy grew 3.8% in Q1 2019. The Ministry of Trade and Industry revised downward its 2019 economic growth projection from 1.5%–3.5% to 1.5%–2.5%. The Thai economy continued to slow amid the trade war between the United States (US) and the People's Republic of China (PRC), with GDP growing 2.8% y-o-y in Q1 2019, easing from revised growth of 3.6% in Q4 2018 and posting the slowest pace since Q1 2014. The GDP growth was lower than expected, weighed down by the decline in external demand. Following the economy's weak performance in Q1 2019, the National Economic and Social Development Council reduced its GDP full-year growth forecast to 3.3%–3.8% from an earlier estimate of 3.5%–4.5%. In Japan, the economy unexpectedly grew at an annualized rate of 2.1% in Q1 2019, marking the second straight quarter of expansion.

Singapore's manufacturing industry grew 0.1% y-o-y in April, driven by increased output in the biomedical manufacturing cluster (11.2% y-o-y) and the chemicals cluster (1.9% y-o-y). On a seasonally adjusted month-on-month (m-o-m) basis, Singapore's manufacturing output expanded 2.4% in April.

Consumer price inflation in Hong Kong, China rose to 2.9% y-o-y in April from 2.1% y-o-y in March. In Singapore, inflation rose to 0.8% y-o-y in April from 0.6% y-o-y in March. Prices of basic goods and services in Malaysia increased 0.2% y-o-y in April, unchanged from March.

Producer prices for goods and services in the Republic of Korea rose 0.3% m-o-m in April 2019, the third consecutive month of increase due to rising crude oil prices. Agriculture, forestry, and marine products had the fastest increase in April at 1.3% m-o-m.

Exports from Japan declined for the fifth straight month, falling 2.4% y-o-y in April. The continuing export slump was attributed to the combined effects of the US–PRC trade tensions and weakening global demand for technology goods. Japan's trade surplus sharply narrowed to JPY60.4 billion in April.

In the Philippines, a balance of payments surplus was registered amounting to USD467 million in April, a reversal from the USD270 million deficit posted in the same month a year earlier. The surplus was attributed to inflows stemming from foreign currency operations, proceeds from investments overseas, and net foreign currency deposits. These offset the outflow of funds due to the government servicing its foreign currency obligations. For the period January–April, the Philippines' total balance of payments surplus reached USD4,265 million.

Last week, local currency government bond yields fell for all tenors in the Republic of Korea and the Philippines and for most maturities in Indonesia, Malaysia, Singapore, Thailand, and Viet Nam, following the release of the Federal Reserve 30-1 April/May minutes showing some concerns regarding inflation. In contrast, yields rose for most maturities in the PRC and Hong Kong, China. The spread between the 2-year and 10-year maturities narrowed for all emerging East Asian markets except for the PRC, the Republic of Korea, and the Philippines.

Key Developments in Asian Local Currency Markets

Issue: 20 May 2019

Hong Kong, China's gross domestic product grew 0.6% year-on-year (y-o-y) in the first quarter (Q1) of 2019, decelerating from modest growth of 1.2% y-o-y in the fourth quarter (Q4) of 2018 to post the slowest pace of growth since Q1 2018. Hong Kong, China's economy-particularly exports and investment-was badly hit in Q1 2019 by the trade dispute between the People's Republic of China (PRC) and the United States (US). Malaysia's economy grew 4.5% y-o-y in Q1 2019, down from growth of 4.7% y-o-y in the previous quarter. Slower growth was registered in all sectors except agriculture, while mining and quarrying output contracted again in Q1 2019. On a seasonally adjusted quarter-on-quarter basis, Malaysia's economy grew 1.1%.

On 16 May, the Bangko Sentral ng Pilipinas announced that it would cut the reserve requirement ratio of universal and commercial banks from 18% to 16%. The decrease will come in three phases: 100 basis points (bps) will be cut on 31 May, 50 bps on 28 June, and 50 bps on 26 July.

In a meeting held on 15-16 May, the Board of Governors of Bank Indonesia left the 7-day reverse repurchase rate unchanged at 6.00%. The deposit facility rate and the lending facility rate were also kept at their existing levels of 5.25% and 6.75%, respectively.

Industrial production in the PRC rose 5.4% y-o-y in April after gaining 8.5% y-o-y in March.

Indonesia recorded a trade deficit of USD2.5 billion in April after posting a trade surplus of USD0.7 billion in March. Exports fell 13.1% y-o-y in April. Imports also declined 6.6% y-o-y.

Singapore's non-oil domestic exports contracted 10.0% y-o-y in April following a decrease of 11.8% y-o-y recorded in March. On a month-on-month seasonally adjusted basis, non-oil domestic exports contracted 0.6%.

Malaysia's current account surplus increased to MYR16.4 billion in Q1 2019 from MYR10.8 billion in Q4 2018. Japan's current account surplus fell 10.6% y-o-y to JPY2,848 billion in March from JPY3,186 billion a year earlier.

Last week, the Government of Indonesia raised JPY177.0 billion worth of samurai bonds in multiple tranches. The issuance marked the largest ever public samurai bond issuance in Asia and also the longest-maturity samurai bonds (15 years and 20 years) from an Asian issuer. On 15 May, the Philippines issued renminbi-denominated bonds called panda bonds. The issuance, comprising CNY2.5-billion of 3-year bond priced at 3.58%, or 32 bps above the benchmark, was rated AAA by China Lianhe Credit Rating. On the same day, the People's Bank of China issued CNY20.0 billion worth of central bank bills in Hong Kong, China.

Local currency government bond yields decreased for most tenors for most economies. Yields increased for most tenors for Indonesia, Singapore, and Thailand, while all tenors declined for the Republic of Korea and Viet Nam. Yield spreads between the 2-year and 10-year tenors expanded for most economies except for the People's Republic of China; Hong Kong, China; the Republic of Korea; and Singapore.

Key Developments in Asian Local Currency Markets

Issue: 13 May 2019

On 7 May, Bank Negara Malaysia cut its key policy rates by 25 basis points (bps) to 3.0% in order to maintain accommodating monetary conditions that support economic growth and price stability. During its 9 May meeting, the monetary board of the Bangko Sentral ng Pilipinas decided to reduce its key policy rates by 25 bps. The overnight reverse repurchase rate was cut to 4.5%, the overnight lending rate down to 5.0%, and the overnight deposit rate down to 4.25%. Meanwhile, the Bank of Thailand's Monetary Policy Committee unanimously voted to maintain the policy rate at 1.75% at its meeting on 8 May on expectations of slower economic expansion.

Indonesia's gross domestic product (GDP) growth slipped to 5.1% y-o-y in the first quarter (Q1) of 2019 from 5.2% in the fourth quarter (Q4) of 2018 on seasonal factors and the slowdown in global economic growth. Contractions were seen in exports and imports of goods and services during the quarter, while growth eased for all other expenditure components. Growth in the manufacturing sector, which accounts for the largest share of GDP, eased to a 3.9% year-on-year (y-o-y) in Q1 2019, from 4.3% y-o-y in Q4 2018. The Philippines' GDP growth slowed in Q1 2019 to5.6% y-o-y from 6.5% y-o-y in Q1 2018 on account of slower growth in the agriculture and industry sectors.

Malaysia's Industrial Production Index grew 3.1% y-o-y in March, accelerating from 1.7% y-o-y growth in February, led by improved performances in the manufacturing and mining sectors.

Consumer price inflation in the People's Republic of China (PRC) rose to 2.5% y-o-y in April from 2.3% y-o-y in March, owing to a rise in the prices of food, tobacco, and liquor. Pork prices rose dramatically by 14.4% y-o-y in April due to supply issues stemming from the spread of swine fever. Producer price inflation also showed an uptick, rising to 0.9% y-o-y in April from 0.4% y-o-y in March. Consumer price inflation in the Philippines eased to 3.0% y-o-y in April from 3.3% y-o-y in March on easing price increases for key food items. Core inflation, which excludes food and energy items, stood at 3.4% y-o-y.

The PRC's exports contracted 2.7% y-o-y in April after rising 14.2% y-o-y in March, stemming from weak demand from the PRC's trading partners due to the economic slowdown as well as the ongoing trade dispute between the PRC and the United States. The Philippines trade deficit reached USD3.1 billion in March, widening from USD2.3 billion in March 2018, as xports contracted 2.5% y-o-y from marginal growth of 0.4% in February and imports continued rise, accelerating 7.8% y-o-y from 3.5% y-o-y growth in February.

The Republic of Korea’s current account surplus narrowed to USD4.8 billion in March from USD5.1 billion in March 2018, but expanded from the USD3.6 billion surplus in February, resulting from a shrinking goods trade surplus amid weak exports and imports, as well as the widening services account deficit.

Last week, local currency government bond yields fell for most tenors in most emerging East Asian markets following indications that the global economy continues to slow, with Malaysia and the Philippine central banks reducing their policy rates last week. Indonesia and Viet Nam were the two exceptions with the entire yield curve shifting upwards. The 2-year versus 10-year yield spread fell for most markets except in Indonesia, Malaysia, the Philippines, and Thailand.

Key Developments in Asian Local Currency Markets

Issue: 06 May 2019

Advance estimates indicate that Hong Kong, China's gross domestic product (GDP) grew 0.5% year-on-year (y-o-y) in the first quarter (Q1) of 2019 after gaining 1.2% y-o-y in the fourth quarter (Q4) of 2018. The slower growth was driven by weakness in the domestic and global economies. Hong Kong, China's domestic consumption grew only 0.1% y-o-y in Q1 2018 after rising 2.7% y-o-y in Q4 2018. Gross domestic fixed capital formation contracted 7.0% y-o-y in Q1 2018 after falling 5.8% y-o-y in Q4 2018. Lastly, after showing no growth in Q4 2018, exports fell 4.2% y-o-y in Q1 2019.

Indonesia's consumer prices rose 2.8% y-o-y in April, up from 2.5% y-o-y in March, largely driven by higher food prices. Consumer price inflation in the Republic of Korea slightly accelerated to 0.6% y-o-y in April from 0.4% y-o-y in March. Thailand's consumer price inflation accelerated to 1.2% y-o-y in April, same pace as in March. In Viet Nam, consumer price inflation rose to 2.9% y-o-y in April from 2.7% y-o-y in March.

Hong Kong, China's trade performance remained weak but showed improvements in March, with exports falling 1.2% y-o-y in March after a decline of 6.9% y-o-y in February. Imports fell 0.1% y-o-y in March after declining 3.8% y-o-y in the prior month. The Republic of Korea's exports dropped 2.0% y-o-y to USD48.9 billion after an 8.2% decline. Imports rose 2.4% y-o-y to USD44.7 billion. Exports from Malaysia contracted 0.5% y-o-y in March following a decline of 5.3% y-o-y in February. Thailand's exports declined 4.2% y-o-y in March after dropping 1.7% y-o-y in February to USD21.5 billion. Imports, on the other hand, fell 5.8% y-o-y in March after declining 7.3% y-o-y in February to USD17.9 billion.

The Index of All-Industry Production in the Republic of Korea decreased 0.7% y-o-y in March, which was smaller than the 1.9% y-o-y decline in February. Industrial production growth in Viet Nam inched up to 9.3% y-o-y in April from 9.1% y-o-y in March.

The People's Republic of China's (PRC) manufacturing Purchasing Managers Index fell slightly to 50.1 in April from 50.5 in March. While lower than the previous month, the PRC's manufacturing PMI in March remained above the 50-point demarcation indicating expansion. The PRC's nonmanufacturing PMI also fell slightly to 54.3 from 54.8 during the same period.

On 30 April, Standard & Poor's raised the Philippines long-term sovereign credit rating to BBB+ from BBB. The rating was given a stable outlook. Standard & Poor's cited the Philippines' above-average economic growth, healthy external position, and sustainable public finance as the rationale for the upgrade.

Last week, local currency government bond yields rose for all tenors in Indonesia and Singapore and for most maturities in the Republic of Korea, Malaysia, and Viet Nam. On the other hand, bond yields fell for all tenors in the Philippines influenced by the ratings upgrade from Standard & Poor's, and for most maturities in Thailand. Bond yield movements were mixed in the People's Republic of China and Hong Kong, China. The spread between the 2- and 10-year maturities narrowed for most emerging East Asian markets except for the People's Republic of China, Republic of Korea, Malaysia, and Singapore.

Key Developments in Asian Local Currency Markets

Issue: 29 April 2019

The Bank of Japan (BOJ), during its 24–25 April monetary meeting, left unchanged the key short-term policy rate at 0.10% and the 10-year target yield for Japanese Government Bonds at zero. To support its policy goals, the BOJ also left unchanged the target annual amounts of its asset purchase program for government bonds (JPY80.0 trillion), exchange-traded funds (JPY6.0 trillion), real-estate investment trusts (JPY80.0 billion), commercial paper (JPY2.2 trillion), and corporate bonds (JPY3.2 trillion). In addition, the BOJ provided clarification for its forward guidance for policy rates, saying that it expects to keep interest rates low at least until the first quarter of 2020. The BOJ unveiled additional measures to help its easing program such as expanding the range of available collateral used in its lending program, improving and promoting the use of a special fund to promote bank lending, and easing requirements for the use of its securities lending facility.

On 24–25 April, Bank Indonesia's Board of Governors decided to keep the 7-day reverse repurchase rate steady at 6.0%. The deposit facility rate (5.25%) and the lending facility rate (6.75%) were also held unchanged. Bank Indonesia deemed that, at their current levels, these rates are supportive of efforts to boost economic growth and protect against risks by keeping inflation contained and shrinking the current account deficit. Bank Indonesia also announced several policies to further boost domestic demand.

The Republic of Korea's real gross domestic product (GDP) increased 1.8% year-on-year (y-o-y) in the first quarter of 2019, slowing from 3.1% y-o-y in the fourth quarter of 2018, based on advance estimates from the Bank of Korea. On a quarter-on-quarter basis, the Republic of Korea's economy contracted 0.3% in the first quarter.

Industrial production in Japan fell 0.9% month-on-month in March after gaining 0.7% month-on-month in February. Singapore's industrial production declined 4.8% y-o-y in March, reversing the 2.6% y-o-y growth in February, primarily due to a large decline in the output of the electronics cluster and the continued decline in the output of the precision engineering cluster.

Consumer prices in Hong Kong, China rose 2.1% y-o-y in March, slower than the 2.3% y-o-y average inflation rate in January–February. In Malaysia, consumer price inflation marginally picked up to 0.2% y-o-y in March after registering deflation for 2 consecutive months. Singapore's inflation rate inched up to 0.6% y-o-y in March from 0.5% y-o-y in February due to smaller declines in private road transport and accommodation costs, according to the Ministry of Trade and Industry.

The Philippines posted a budget deficit of PHP58.4 billion in March on account of government spending reaching PHP287.3 billion against revenue collection of PHP228.9. This brought the cumulative budget deficit in Q1 2019 to PHP90.2 billion, with government spending of PHP778.0 billion and revenue collection of PHP687.7 billion.

Last week, local currency government bond yields rose for all tenors in Hong Kong, China; and for most tenors in the People's Republic of China, Indonesia, and Thailand. Bond yields fell for all maturities in the Republic of Korea, and for most tenors in Malaysia and Viet Nam. Bond yields were mixed in the Philippines and Singapore. The spread between the 2- and 10-year maturities widened for most emerging East Asian markets except for Malaysia, the Philippines, Singapore, and Thailand.

Key Developments in Asian Local Currency Markets

Issue: 22 April 2019

The People's Republic of China's (PRC) gross domestic product (GDP) grew 6.4% year-on-year (y-o-y) in the first quarter (Q1) of 2019, the same rate of growth as in the fourth (Q4) of 2018. Primary industry GDP grew 2.7% y-o-y in Q1 2019 after a gain of 3.5% y-o-y in Q4 2018. Tertiary industry grew 7.0% y-o-y in Q1 2019 after rising 7.6% y-o-y in the previous quarter. GDP growth in secondary industry quickened to 6.1% y-o-y versus 5.8% y-o-y in Q4 2018.

At its 18 April Monetary Policy Board meeting, the Bank of Korea decided to hold steady the base rate at 1.75%. The Bank of Korea also revised downward its estimates for 2019 GDP growth from a projection made in January of 2.6% to the mid-2% level. The Bank of Korea also expects inflation to fluctuate below the 1% level for some time before rising to the low- to mid-1% level in the second half of the year.

The PRC's industrial production grew 6.5% y-o-y in Q1 2019 after production rose 5.3% y-o-y in January–February. For the month of March, the PRC's industrial production grew 8.5% y-o-y, driven largely by the manufacturing sector. The PRC's fixed-asset investment also picked up slightly, rising 6.3% y-o-y in Q1 2019 after gaining 6.1% y-o-y in January–February.

Indonesia recorded a trade surplus of USD0.5 billion in March, up from USD0.3 billion in February. Exports contracted 10.0% y-o-y in March to USD14.0 billion. Imports also slipped 6.8% y-o-y to USD13.5 billion in the same period. Japan's exports fell 2.4% y-o-y in March after declining 1.2% y-o-y in February. Imports increased 1.1% y-o-y in March after falling 6.6% y-o-y in February. Singapore's non-oil domestic exports fell 11.7% y-o-y in March after rising 4.8% y-o-y in February.

Consumer price inflation in Japan rose to 0.5% y-o-y in March from 0.2% y-o-y in February. In the Republic of Korea, producer prices climbed 0.1% y-o-y in March after declining 0.2% y-o-y in February.

Personal remittances from overseas Filipinos rose 1.2% y-o-y to reach USD2.6 billion in February, expanding at a slower pace than the 3.4% y-o-y increase in January and bringing cumulative personal remittances to USD5.3 billion during the first 2 months of the year.

The Philippines posted an overall balance of payments surplus of USD627 million in March, expanding from USD467 million in February and reversing the USD266 million deficit recorded in March 2018. Year-to-date through March, the balance of payments position posted a surplus of USD3.8 billion.

Last week, local currency government bond yields rose for all tenors in the PRC, the Republic of Korea, and Hong Kong, China. Yields also rose for most tenors in Malaysia, the Philippines, Singapore, and Thailand. On the other hand, bond yields mostly declined in Indonesia and Viet Nam. The spread between the 2- and 10-year maturities widened for most emerging East Asian markets except for the PRC, the Republic of Korea, and Hong Kong, China.

Key Developments in Asian Local Currency Markets

Issue: 15 April 2019

Singapore's gross domestic product grew 1.3% year-on-year (y-o-y) in the first quarter of 2019, down from the 1.9% y-o-y growth recorded in the fourth quarter of 2018. On a quarter-on-quarter basis, Singapore's gross domestic product grew 2.0%, up from the 1.4% posted in the previous quarter.

In its 12 April statement, the Monetary Authority of Singapore (MAS) decided to maintain its monetary policy, keeping the slope of the Singapore dollar nominal effective exchange rate policy band, its width, and its center unchanged. The MAS decision came amid the slowdown in Singapore's economy and consumer price inflation. The MAS, however, expects sustained growth in succeeding quarters, albeit in the lower half of the full-year 2019 forecast of 1.5%–3.5%.

Malaysia's industrial production growth slowed in February to 1.7% y-o-y from 3.2% y-o-y in January.

The People's Republic of China's (PRC) consumer prices rose 2.3% y-o-y in March after gaining 1.5% y-o-y in February. PRC's producer prices 0.4% y-o-y in March, from 0.1% y-o-y in February, the first acceleration in producer price inflation since June 2018.

Japan's producer prices, as measured by the corporate goods index, rose 1.3% y-o-y in March, up from 0.9% y-o-y in February. On a month-on-month (m-o-m) basis, producer prices rose 0.3% in March, the same m-o-m pace as in February.

The PRC's exports grew 14.2% y-o-y in March after declining 20.8% y-o-y in February. Imports continued to fall, however, contracting 7.6% y-o-y after dipping 5.2% y-o-y during the same period. The PRC reported a trade surplus of USD32.7 billion in March. The Philippines posted a trade deficit of USD2.8 billion in February, up from the USD2.5 billion deficit recorded in February 2018. On a m-o-m basis, the economy's trade deficit narrowed from USD3.9 billion in January.

Japan had a current account surplus of JPY2,767 billion in February, largely due to a primary income surplus of JPY2,015 billion.

Indonesia's foreign exchange reserves climbed to USD124.5 billion in March from USD123.3 billion, due to an increase in foreign exchange receipts, including oil and gas foreign exchange receipts. Hong Kong, China's foreign reserves amounted to USD437.9 billion in March, up from USD434.4 billion in February, accounting for 47% of the Hong Kong dollar's M3 money supply and representing about seven times the currency in circulation. The total foreign reserves of Singapore increased to SGD400.2 billion in March from SGD395.2 billion in the previous month. This was enough to offset the decline in Singapore's special drawing rights and reserve position with the International Monetary Fund. Singapore's foreign reserves increased for the third straight month in March.

Last week, local currency government bond yields rose for most tenors in Hong Kong, China; Indonesia; Malaysia; the Philippines; Thailand; and Viet Nam; and for all tenors in the People's Republic of China. Yields were down for most tenors in the Republic of Korea and all tenors in Japan. Mixed yield movements were seen in Singapore. Yield spread between 2-year and 10-year government bonds expanded in the People's Republic of China, Indonesia, Malaysia, the Philippines, and Singapore; but contracted in Japan; Hong Kong, China; Republic of Korea; Thailand; and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 08 April 2019

The growth rate of the Philippines’ gross domestic product in the fourth quarter (Q4) of 2018 was revised upward to 6.3% year-on-year (y-o-y) from 6.1% y-o-y. Accordingly, growth in the Philippines’ gross national income in Q4 2018 was revised to 5.7% y-o-y from 5.2% y-o-y, and the increase in the net primary income in Q4 2018 was raised to 2.7% y-o-y from 0.9% y-o-y. The economy’s annual growth rate for full-year 2018 was unchanged at 6.2%.

The Republic of Korea’s exports dropped 8.2% y-o-y to USD47.1 billion in March and imports slipped 6.7% y-o-y to USD41.9 billion. The Republic of Korea posted a trade surplus of USD5.2 billion in March. On the other hand, Malaysia’s exports dropped 5.3% y-o-y and imports declined 9.4% y-o-y in February. Malaysia’s trade surplus amounted to MYR11.1 billion in February.

The Republic of Korea’s current account surplus expanded to USD3.6 billion in February from USD2.8 billion in January, driven by the narrowing deficit in services.

The People’s Republic of China’s Caixin/Markit Purchasing Managers Index (PMI) for manufacturing rose to 50.8 in March from 49.9 in February, indicating a shift from contraction to expansion in the manufacturing sector. Likewise, the PMI of Singapore increased to 50.8 in March from 50.4 in February. On the other hand, Japan’s manufacturing activity, as indicated by the Nikkei Japan Manufacturing PMI, continued to show weakness, rising slightly to 49.2 from 48.9 in February. In the Philippines, the Nikkei Manufacturing PMI declined to 51.5 in March from 51.9 in February.

Consumer price inflation in Indonesia slowed to 2.5% y-o-y in March from 2.6% y-o-y in February. On a month-on-month basis, however, inflation inched up to 0.1% in March after posting deflation of 0.1% in the previous month. The Republic of Korea’s consumer price inflation eased in March to 0.4% y-o-y from 1.2% y-o-y in March 2018. On a month-on-month basis, the Republic of Korea’s consumer prices declined 0.2%. Prices of basic goods and services in the Philippines grew 3.3% y-o-y in March, down from the 3.8% y-o-y inflation recorded in February. Core inflation, which excludes volatile food and energy items, eased to 3.5% y-o-y in March from 3.9% y-o-y the previous month. On the other hand, Thailand’s consumer price inflation increased for the third consecutive month, reaching 1.2% y-o-y in March from 0.7% y-o-y in February and 0.3% y-o-y in January. Core inflation, which excludes raw food and energy prices, barely changed in March versus February at 0.6% y-o-y.

The value of retail sales dropped 10.1% y-o-y to HKD40.7 billion in February, following a 7.0% y-o-y increase recorded in January. The volume of retail sales, which corresponds to the number of transactions, dropped 10.4% y-o-y in February versus a 6.9% y-o-y increase the previous month.

The Bank of Thailand and Bank Indonesia signed a memorandum of understanding on 4 April to strengthen payment systems and financial innovation cooperation between Thailand and Indonesia.

Local currency government bond yields increased for most tenors for most economies. Yields decreased for most tenors for Indonesia, Malaysia, and Singapore, while they were mixed for Thailand. Yield spreads between the 2-year and 10-year tenors expanded for most economies except for Indonesia, Thailand, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 01 April 2019

Consumer price inflation in Singapore accelerated to 0.5% year-on-year (y-o-y) in February from 0.4% y-o-y in the previous month. The growth was attributed to the slower pace of price declines for private road transport and accommodations in February versus January. The Monetary Authority of Singapore’s measure of core inflation, which excludes private road transport and accommodation costs, increased 1.5% y-o-y in February versus 1.7% y-o-y in January. In Viet Nam, consumer price inflation inched up to 2.7% y-o-y in March from 2.6% y-o-y in February, with increases recorded for all components of the Consumer Price Index in March except for medical products and healthcare, transport, and communication.

The Index of All-Industry Production in the Republic of Korea decreased 1.4% y-o-y in February, reversing 2 months of consecutive y-o-y growth. Industrial production contracted 2.7% y-o-y, as manufacturing production fell 2.5% y-o-y.

Singapore’s manufacturing output rose 0.7% y-o-y in February, rebounding from a decrease of 0.4% y-o-y in January. Expansions were seen in the biomedical manufacturing, transport engineering, general manufacturing, and chemicals clusters, while output from the electronics and precision engineering clusters declined.

Industrial production growth in Viet Nam slowed to 9.1% y-o-y in March from 10.3% y-o-y in February. While all major sectors posted positive y-o-y increases in March, slower growth was recorded for both the manufacturing and electricity sectors. Output in the mining and quarrying sector rebounded, with growth rising marginally in March following a contraction in February.

Real gross domestic product growth in Viet Nam eased to 6.8% y-o-y in the first quarter (Q1) of 2019 from 7.5% y-o-y in Q1 2018. All major industry types posted slower growth in Q1 2019 compared with Q1 2018. The largest contributor to overall gross domestic product growth was the industry and construction sector, which expanded 8.6% y-o-y in Q1 2019. The services sector rose 6.5% y-o-y in Q1 2019, and the agriculture sector grew 2.7% y-o-y in the same period.

Hong Kong, China’s exports and imports declined 6.9% y-o-y and 3.8% y-o-y in February, respectively, resulting in a trade deficit amounting to HKD48.8 billion. The weak export performance in Hong Kong, China was attributed to the slowdown in global growth and uncertainties relating to trade discussions between the United States and the People’s Republic of China. Thailand recorded negative export growth for the third consecutive month in February, with exports declining 1.7% y-o-y to USD19.6 billion. Imports also decreased in February, falling 7.3% y-o-y to USD16.2 billion. Thailand recorded a trade surplus of USD3.6 billion during the month, resulting in a wider current account balance of USD6.5 billion in February compared with USD2.3 billion in January. In Viet Nam, exports climbed 5.4% y-o-y to USD22.4 billion and imports grew 14.7% y-o-y to USD21.8 billion, resulting in a trade surplus of USD600 million.

Last week, local currency government bond yields were down for most tenors in the People’s Republic of China, Malaysia, Philippines, and Viet Nam and for all tenors in Hong Kong, China and the Republic of Korea. In Indonesia and Thailand, yields were up for most tenors and up for all tenors in Singapore. The spread between the 2- and 10-year maturities narrowed for all emerging East Asian markets except in Indonesia, the Republic of Korea, Singapore, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 25 March 2019

Last week, we published the latest issue of the Asia Bond Monitor. The report noted that local currency government bond yields in emerging East Asia declined between 28 December 2018 and 15 February 2019, following dovish statements from the United States (US) Federal Reserve. This provided a respite for the region's financial markets as investor sentiment toward emerging market assets improved. However, risks remain, including uncertainties relating to trade talks between the People's Republic of China (PRC) and the US, and to the Brexit process, particularly should it become disorderly. The report also noted that emerging East Asia's local currency bond market surpassed USD13.0 trillion at the end of December, despite a slowdown in the quarter-on-quarter and year-on-year (y-o-y) growth rates. A copy of the report can be found at /documents/abm_mar_2019.pdf.

The Federal Reserve left its policy rate target unchanged at its monetary policy meeting on 19–20 March at a range of 2.25%–2.50%. The Federal Reserve also released updated economic forecasts. The 2019 gross domestic product growth forecast was reduced from 2.3% in its December forecast to 2.1%. The 2019 unemployment rate forecast was also revised upward to 3.7% from 3.5%, and the increase in the Personal Consumption Expenditure Index was revised to 1.8% from 1.9%. Significantly, the Federal Reserve updated the forecast for its monetary policy rate for 2019 from a previous forecast made in December of two rate hikes to no further rate hikes for the year. The Federal Reserve also said that it would slow the current pace of its run-off program for the reduction of its balance sheet.

Policy rates were also held steady in some emerging East Asian markets last week. Rates were left unchanged by Bank Indonesia, Bangko Sentral ng Pilipinas, and the Bank of Thailand.

Consumer price inflation eased in Hong Kong, China and remained unchanged in Japan in February. Malaysia posted deflation in February. In the Republic of Korea, the Producer Price Index decreased 0.2% y-o-y in February.

Industrial production growth in Japan, fell 3.4% month-on-month on a seasonally adjusted basis in January after falling 0.1% month-on-month in December 2018.

Hong Kong, China's current account surplus narrowed to HKD42 billion in the fourth quarter of 2018 from HKD48 billion in the previous quarter. In the Philippines, the balance of payments registered a surplus of USD467 million in February.

Japan's exports fell 1.2% y-o-y in February and imports declined 6.7% y-o-y, resulting in a monthly trade surplus of JPY339 billion. Singapore's non-oil domestic exports expanded 4.9% y-o-y in February.

The Republic of Korea recorded net foreign bond outflows in February of KRW192 billion, down from KRW3,739 billion in January.

Last week, local currency government bond yields in emerging East Asia declined in Malaysia and for most maturities in Indonesia, the Republic of Korea, Singapore, and Thailand. Yield movements were mixed in the People's Republic of China, the Philippines, and Hong Kong, China. Bucking the trend was Viet Nam, where bond yields rose for all tenors. Except for Malaysia, the spread between the 2- and 10-year maturities narrowed for all emerging East Asian markets.

Key Developments in Asian Local Currency Markets

Issue: 18 March 2019

The Bank of Japan (BOJ) left its monetary policy stance unchanged at its 14–15 March meeting. During the meeting, the BOJ kept its key short-term interest rate target at –0.1% and its 10-year Japanese Government Bond yield target at 0%, with some room for fluctuation. The BOJ also left unchanged the annual targets for its asset purchase program. The BOJ forecasts that Japan’s economy will continue its moderate growth driven by domestic demand, but will also be affected by weaknesses in the global economy in the short-term.

In the first 2 months of 2019, the People’s Republic of China’s (PRC) industrial production grew 5.3% year-on-year (y-o-y) after growing 5.7% y-o-y in December. Fixed-asset investment in the PRC grew 6.1% y-o-y in January–February versus 6.3% y-o-y in full-year 2018. Retail sales in the PRC grew 8.2% y-o-y in January–February, the same rate as in December.

Hong Kong, China’s industrial production index for manufacturing rose 1.3% y-o-y in the fourth quarter of 2018, up from the 1.2% y-o-y increase in the previous quarter. Malaysia’s industrial production growth slightly slowed to 3.2% y-o-y in January from 3.4% y-o-y in December.

Indonesian exports declined in February to USD12.5 billion, falling 11.3% y-o-y. Imports also contracted 14.0% y-o-y to USD12.2 billion in February following a 1.8% y-o-y drop in January. As a result, a trade surplus amounting to USD0.3 billion was recorded in February, a turnaround from the trade deficit of USD1.2 billion in January. The Philippines’ trade deficit grew to USD3.8 billion in January from USD3.2 billion in the same month in the previous year, as exports contracted while imports expanded. Exports declined 1.7% y-o-y compared with a decline of 4.0% y-o-y in January 2018.

The Government of Malaysia issued a JPY200 billion samurai bond on 15 March, following a 30-year absence from the Japanese yen bond market. The JPY-denominated issuance has a tenor of 10 years and a coupon rate of 0.63%. The issue, which is guaranteed by the Japan Bank for International Cooperation as part of a government-to-government arrangement to foster closer economic and cultural ties between Malaysia and Japan, is the largest such guaranteed sovereign bond issuance in the market.

On 12 March, the Bureau of the Treasury of the Philippines issued PHP235.9 billion worth of 5-year Retail Treasury Bonds with a 6.25% coupon. The issuance comprised PHP113.8 billion raised during the auction on 26 February together with PHP122.1 billion from a public offering on 8 March. The total amount issued was much higher than the originally planned PHP30.0 billion offering.

WATCH OUT: The upcoming issue of the Asia Bond Monitor will be released on 21 March and will be available for download on the AsianBondsOnline website.

Government bond yields in emerging East Asia fell for most tenors in Indonesia, Malaysia but rose for most tenors in the remaining markets, with the exception of the PRC, where yields were mixed. The 2-year versus 10-year yield spread fell in the PRC; Hong Kong, China; Indonesia; Malaysia and Viet Nam and rose in the remaining markets.

Key Developments in Asian Local Currency Markets

Issue: 11 March 2019

The Government of the People's Republic of China (PRC) adjusted its real gross domestic product (GDP) target for 2019 to a range of 6.0%–6.5% year-on-year (y-o-y) during the National People's Congress, down from its previous target of 6.5% y-o-y. The inflation target was set at 3.0% y-o-y. A budget deficit target of 2.8% of GDP was set for 2019, up from the previous year's 2.6% target. Japan's final GDP growth rate for the fourth quarter (Q4) of 2018 was 1.9% y-o-y, up from a preliminary figure of 1.4% y-o-y. The Republic of Korea posted 3.1% y-o-y growth in Q4 2018, unchanged from the previously released advance estimates of the Bank of Korea, and up from the 2.0% y-o-y growth in the previous quarter.

The Monetary Policy Committee of Bank Negara Malaysia (BNM) kept the overnight policy rate at 3.25% in its meeting on 5 March. BNM expects inflation to be broadly stable in 2019 compared with 2018. With risks to growth tilted to the downside, BNM has turned cautious about developments surrounding the Malaysian economy. Some economic analysts expect the central bank will cut the benchmark policy rate by 25 basis points during the second half of the year.

Consumer price inflation in the Republic of Korea rose 0.5% y-o-y in February. Prices of basic goods and services in the Philippines increased 3.8% y-o-y in February, down from the 4.4% y-o-y inflation posted in January. Inflation in the Philippines is expected to continue to slow as rice prices decrease due to the enactment of the Rice Industry Modernization Act. The PRC's consumer prices rose 1.5% y-o-y in February after gaining 1.7% y-o-y in January. The lower inflation rate was driven by a decrease in food price inflation, with food prices rising 0.7% y-o-y in February versus 1.2% y-o-y in January.

The Republic of Korea's current account surplus narrowed to USD2.8 billion in January from USD4.8 billion in December. Japan's current account balance rose to JPY600.4 billion in January from JPY452.8 billion in the previous month.

The PRC's exports fell 20.7% y-o-y in February after rising 9.1% y-o-y in January. The decline in exports is attributed to the timing of the Lunar New Year holidays, which resulted in less business activity in February, as well the current PRC–US trade dispute. Imports fell by much less in February, declining 5.2% y-o-y after a decline of 1.5% y-o-y in the previous month. The PRC reported a trade surplus of USD4.1 billion, down from January's surplus of USD39.2 billion. Malaysia's exports continued to outpace imports in January, registering growth of 3.1% y-o-y, while slowing from 5.1% y-o-y in December. Import growth was unchanged between December and January at 1.0% y-o-y in both months.

The Government of the PRC said that it would cut business and personal taxes by CNY1.3 trillion, up from the previous year's CNY1.1 trillion tax reduction. The government said that the total reduction in taxes in 2019, including the adjustment in social security, would be the equivalent of CNY2.0 trillion.

Singapore's Purchasing Managers Index declined from 50.7 in January to 50.4 in February, the lowest since December 2016.

Local currency government bond yields declined for most tenors in most economies, but rose for most tenors in Hong Kong, China; Indonesia, and Viet Nam. Yield spread between 2-year and 10-year local currency government bonds contracted for most economies, but expanded for Indonesia, Republic of Korea, Malaysia, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 04 March 2019

Hong Kong, China’s gross domestic product rose 1.3% year-on-year (y-o-y) in the fourth quarter (Q4) of 2018, decelerating from 2.8% y-o-y in the previous quarter, the slowest growth rate since the first quarter of 2016. The ongoing trade conflict between the United States and the People’s Republic of China (PRC) weighed heavily on Hong Kong, China’s economic performance in Q4 2018 as exports weakened.

At its 28 February Monetary Policy Board meeting, the Bank of Korea decided to maintain the base rate at 1.75%. The central bank stated that the domestic economy, generally backed by modest increases in consumption, was experiencing sustained growth at a rate not diverging significantly from its potential level.

Hong Kong, China’s trade deficit narrowed to HKD10 billion in January from HKD51 billion in December. Viet Nam’s trade deficit widened in February to USD900 million from USD800 million in January. With weaker exports and higher imports, Thailand incurred a trade surplus of USD63 million in January, considerably lower than the USD2.5 billion surplus in the previous month.

The Index of All-Industry Production in the Republic of Korea rose 0.6% y-o-y in January, following a 0.4% y-o-y increase in December. On a month-on-month (m-o-m) basis, the index increased 0.8% in January. In Viet Nam, industrial production growth rose to 10.3% y-o-y in February from 7.9% y-o-y in January. Between January and February, industrial production fell 16.8%. Japan’s industrial production fell 3.7% on a seasonally adjusted m-o-m basis in January after a 0.1% m-o-m decline in December. Singapore’s manufacturing output declined 3.1% y-o-y in January, a reversal from the growth of 1.7% y-o-y recorded in December. On a seasonally adjusted m-o-m basis, Singapore’s manufacturing output climbed 0.9% in January, rebounding from a decline of 5.2% in the previous month.

The PRC’s manufacturing Purchasing Managers Index fell to 49.2 in February from 49.6 in January. The PRC’s nonmanufacturing Purchasing Managers Index also fell as to 54.3 in February from 54.7 in the previous month.

Consumer price inflation in Thailand accelerated to 0.7% y-o-y in February from 0.3% y-o-y in January. Core inflation slightly slowed to 0.60% y-o-y from 0.69% y-o-y in January. In Viet Nam, consumer price inflation rose to 2.64% y-o-y in February, up marginally from 2.56% y-o-y in January. Between January and February, consumer price inflation was 0.8% m-o-m. Consumer price inflation in Indonesia slowed to 2.6% y-o-y in February from 2.8% y-o-y in January. On a m-o-m basis, deflation of 0.08% was recorded in February due mainly to a decline in food prices. The growth of prices of basic goods and services in Singapore slowed to 0.4% y-o-y in January from 0.5% y-o-y in the previous month. The Monetary Authority of Singapore’s measure of core inflation eased to 1.7% y-o-y from 1.9% y-o-y in the previous month.

The Philippines issued PHP113.8 billion of 5-year Treasury bonds with a coupon of 6.25% amid favorable rates and strong demand.

Local currency government bond yields increased for most tenors for most economies except for Indonesia, the Republic of Korea, and Viet Nam. Yield spreads between the 2-year and 10-year tenors expanded for most economies except for Hong Kong, China; Indonesia; and the Republic of Korea.

Key Developments in Asian Local Currency Markets

Issue: 25 February 2019

The Thai economy expanded faster than expected in the fourth quarter of 2018 (Q4) at 3.7% year-of-year (y-o-y), up from revised growth of 3.2% y-o-y in the third quarter (Q3). The improvement was underpinned by private consumption and investment, as well as the rebound in exports of goods and services. Government expenditure growth softened while government investment declined in Q4 2018. On the production side, growth was driven by the manufacturing and service sectors as agricultural production moderated. For full-year 2018, Thailand's gross domestic product expanded 4.1% y-o-y, the fastest annual growth registered since 2013. The National Economic and Social Development Council forecasts that Thailand's economy will expand 3.5%–4.5% in 2019.

Bank Indonesia's Board of Governors held the 7-day reverse repurchase rate steady at 6.00% in a meeting held on 20–21 February. The central bank said the rates were aligned with efforts to steer the current account deficit toward a manageable threshold and maintain the attractiveness of domestic financial markets, taking into account slowing global economic growth and the expectation of fewer rate hikes by the United States Federal Reserve in 2019.

Japan's consumer price inflation decelerated to 0.2% y-o-y in January from 0.3% y-o-y in December, which was attributed to a decline in food prices of 1.5% y-o-y in January. In Hong Kong, China, consumer prices slowed to 2.4% y-o-y in January from 2.5% y-o-y in December, mainly due to a decline in electricity charges upon the implementation of a government subsidy for electricity in January. Malaysia recorded a decline of 0.7% y-o-y in its Consumer Price Index in January, following a marginal increase of 0.2% y-o-y in December, largely associated with transport prices, which declined 7.8% y-o-y. It was the first time since November 2009 that Malaysia experienced deflation.

Japan's trade performance weakened in January, with exports declining 8.4% y-o-y and imports declining 0.6% y-o-y. Japan reported a trade deficit of JPY1,415.2 billion in January versus a deficit of JPY56.7 billion in December.

Singapore's non-oil domestic exports declined 10.1% y-o-y in January after an 8.5% y-o-y contraction in December. The drop in exports was due to larger declines in electronics and nonelectronics exports, which slid 15.9% y-o-y and 7.9% y-o-y, respectively.

The Philippines registered a balance of payments surplus of USD2.7 billion in January, bouncing back from the USD0.5 billion deficit a year earlier. The January 2019 surplus was the largest since a USD3.2 billion surplus was posted in July 2012. The balance of payments surplus led to an increase in gross international reserves to USD82.1 billion at the end of January.

The Republic of Korea's bond market registered net foreign outflows in January of KRW3.7 trillion, reversing net inflows of KRW1.5 trillion in December. Foreign investors' cumulative holdings of bonds as of January amounted to KRW110.2 trillion, representing 6.4% of the total listed bonds.

Last week, local currency government bond yields went up for most tenors in all emerging East Asian economies except for the Republic of Korea, where yields went up for all tenors and for Hong Kong, China and Indonesia where yields fell for most tenors. The spread between the 2- and 10-year tenors narrowed for most markets except for Hong Kong, China; Indonesia, and the Philippines.

Key Developments in Asian Local Currency Markets

Issue: 18 February 2019

Preliminary estimates for Japan’s gross domestic product (GDP) indicate that the economy grew 1.4% year-on-year (y-o-y) in the fourth quarter (Q4) of 2018 after contracting 2.6% y-o-y in the previous quarter. On a quarter-on-quarter (q-o-q) basis, Japan’s Q4 2018 GDP grew 0.3% versus a decline of 0.7% q-o-q in the third quarter (Q3) of 2018. In Malaysia, the economy expanded 4.7% y-o-y in Q4 2018, outdoing its performance in Q3 2018 of 4.4% y-o-y. For the year as a whole, economic growth moderated to 4.7% y-o-y in 2018 from 5.9% y-o-y in 2017. In Singapore, GDP growth moderated to 1.9% y-o-y in Q4 2018 from 2.4% y-o-y in Q3 2018.

Malaysia’s industrial production improved in December, accelerating to 3.4% y-o-y from 2.6% y-o-y in November, supported by all production sectors. In 2018, industrial production in Malaysia expanded 3.1% y-o-y, down from 4.3% y-o-y growth in 2017.

In the People’s Republic of China (PRC), consumer prices rose 1.7% y-o-y in January after gaining 1.9% y-o-y in December. The slower increase came from a decline in food price inflation, which fell to 1.9% y-o-y in January. The PRC’s producer prices rose only 0.1% y-o-y in January after gaining 0.9% y-o-y in December. In Japan, producer prices fell 0.6% month-on-month in January, the same rate of decline as in December.

The Republic of Korea’s current account surplus narrowed to USD4.8 billion in December from USD5.2 billion in November, driven by the decline in the trade surplus. For full-year 2018, the Republic of Korea posted a USD76.4 billion current account surplus. In Malaysia, the current account surplus surged to MYR10.8 billion in Q4 2018 from MYR3.8 billion in the previous quarter. In full-year 2018, Malaysia’s current account surplus amounted to MYR33.5 billion, which was lower than the MYR40.3 billion surplus in full-year 2017.

The PRC’s exports rose 9.1% y-o-y in January and its imports fell 1.5% y-o-y, resulting in a monthly trade surplus of USD39.2 billion in January. In Indonesia, exports contracted 4.7% y-o-y in January and imports fell 1.8% y-o-y. The trade deficit widened to USD1.2 billion in January. The Philippines recorded a trade deficit amounting to USD3.8 billion in December as exports declined 12.3% y-o-y and imports fell 9.4% y-o-y.

Hong Kong, China's foreign currency reserves expanded to USD432 billion in January from USD424.7 billion in December. In Malaysia, international reserves reached USD102.1 billion at the end of January, up from USD101.4 billion at the end of December.

Last week, the Government of Indonesia sold USD2.0 billion worth of global green sukuk (Islamic bonds). The sale comprised USD750 million of 5.5-year sukuk with a coupon rate of 3.9% and USD1.25 billion of 10-year sukuk with a coupon rate of 4.45%. Proceeds from the sukuk issuance will be used to fund projects relating to renewable energy, green tourism, and waste management.

Local currency government bond yields fell last week for all tenors in Viet Nam, and for most maturities in the PRC, Malaysia, and Singapore. On the other hand, bond yields climbed for most maturities in Hong Kong, China; Indonesia, the Philippines, and Thailand. Bond yields were mixed in the Republic of Korea. The spread between the 2- and 10-year tenors narrowed for most markets except for Hong Kong, China; Indonesia, Singapore, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 11 February 2019

The monetary board of the Bangko Sentral ng Pilipinas decided to keep policy rates steady during its first meeting of the year on 7 February. The overnight reverse repurchase rate remained at 4.75%, while the overnight lending and deposit rates were also left unchanged at 5.25% and 4.25%, respectively. The decision came amid the central bank’s assessment that inflation in the Philippines has become manageable, with the projection for average inflation falling within the government’s target of 2%–4% in 2019 due to lower oil prices and a stable supply of key food items. The Bank of Thailand maintained the policy rate at 1.75% in its meeting on 6 February on expectations that the Thai economy would continue to expand around its potential despite some downside risks.

Real gross domestic product (GDP) growth in Indonesia reached 5.18% year-on-year (y-o-y) in the fourth quarter of 2018, broadly unchanged from the 5.17% y-o-y posted in the third quarter of 2018. For full-year 2018, the economy grew 5.2% y-o-y, the fastest pace since 2013, and higher than 5.1% y-o-y expansion recorded in 2017. For 2019, Bank Indonesia estimates that economic growth will range between 5.0% and 5.4%.

Prices of basic goods and services in the Philippines rose 4.4% y-o-y in January, down from 5.1% y-o-y in December. While easing, January inflation fell outside the government’s target of 2.0%–4.0% for full-year 2019. The easing inflation was mainly due to slower price growth for food and nonalcoholic beverages, which dropped to 5.6% y-o-y from 6.7% y-o-y in the previous month as the domestic supply of food improved, spurred by rice imports and the recent harvest. Core inflation, which excludes food and energy items, stood at 4.4% y-o-y in January, down from 4.7% y-o-y the previous month.

Japan reported a preliminary current account surplus of JPY452.8 billion in December, down from JPY757.2 billion in November. Japan reported a trade surplus of JPY216 billion versus a deficit of JPY559 billion in November. The improved trade balance was due to both an increase in exports (from JPY6,918 billion to JPY7,070 billion) and a decline in imports (from JPY7,477 billion to JPY6,854 billion).

The Purchasing Managers Index of Singapore continued its decline, dropping to 50.7 in January from 51.1 in December. Singapore’s PMI has been declining since September when it stood at 52.4.

Foreign exchange reserves in Indonesia slipped to USD120.1 billion in January from USD120.7 billion in December, due mainly to debt repayment by the government. At the end of January, the foreign reserves could fund 6.7 months of imports or 6.5 months of imports and debt servicing. In Japan, foreign exchange reserves rose slightly in January to USD1.28 trillion from USD1.27 trillion in December.

Local currency government bond yields fell for all tenors in the Republic of Korea and for most tenors in Hong Kong, China; Indonesia, Malaysia; Philippines and Singapore last week. Yields rose for most tenors in Thailand, after policy rates were unchanged despite some members of the central bank voting for a rate hike. In the PRC and Viet Nam, yields were unchanged due to a week-long holiday. The 2-year versus 10-year yield spread rose in most markets except in Hong Kong, China; the Republic of Korea and Malaysia.

Key Developments in Asian Local Currency Markets

Issue: 04 February 2019

The Index of All-Industry Production in the Republic of Korea rose 0.3% year-on-year (y-o-y) in December, following a 0.6% y-o-y increase in November. The growth was led by an increase in industrial production of 1.6% y-o-y as manufacturing production rose 2.0% y-o-y. On the other hand, there was a 9.5% y-o-y decline in the construction subindex. Industrial production growth in Viet Nam moderated to 7.9% y-o-y in January from 11.4% y-o-y in December. Among the subindexes, the manufacturing sector posted the fastest growth rate at 10.1% y-o-y in January, although this was slower than the 13.7% y-o-y expansion in December.

The People's Republic of China's (PRC) Purchasing Managers Index (PMI) for manufacturing rose to 49.5 in January from 49.4 in December. The slight increase in the manufacturing PMI was driven by a rise in output (from 50.8 to 50.9) and raw material inventories (from 47.1 to 48.1). The PRC's nonmanufacturing PMI also showed gains, rising to 54.7 in January from 53.8 in December.

Consumer price inflation in Indonesia eased to 2.8% y-o-y in January from 3.1% y-o-y in December. The Republic of Korea's Consumer Price Index continued to ease in January to 0.8% y-o-y from 1.3% y-o-y in December. Consumer prices in Thailand in January increased 0.3% y-o-y, down from 0.4% y-o-y in December. Core inflation in January rose marginally to 0.69% y-o-y from 0.68% y-o-y in the previous month. In Viet Nam, consumer price inflation moderated to 2.6% y-o-y in January from 3.0% y-o-y in December. On a month-on-month (m-o-m) basis, however, the inflation rate rose to 0.1% m-o-m in January (after decelerating 0.3% m-o-m in December), due to an increase in consumer demand ahead of the Tet holiday.

Hong Kong, China's December trade activity exhibited large declines in exports and imports. Exports dropped 5.8% y-o-y in December after a 0.8% y-o-y decline in November. Imports dropped 7.0% y-o-y in December, reversing the marginal increase of 0.5% in November due to the large declines in imports of nonmetallic minerals; electrical machinery, apparatus, and appliances; and telecommunications apparatus and equipment. Double-digit declines were seen in exports to India and in imports from five trading partners in Asia. Exports and imports amounted to HKD340 billion and HKD391 billion, respectively, resulting in a trade deficit of HKD51 billion in December.

Thailand's exports contracted 1.6% y-o-y to USD19.5 billion in December after increasing 0.2% y-o-y in November. Exports from Malaysia registered 4.8% y-o-y growth in December, more than doubling the growth in November of 1.6% y-o-y and amounting to MYR83.3 billion. The Republic of Korea's export growth decreased 5.8% y-o-y to USD 46.4 billion in January. Import growth also slipped 1.7% y-o-y to USD45.0 billion. Viet Nam posted a trade deficit of USD800 million in January, wider than the USD811 million recorded in December. Exports contracted 1.3% y-o-y, a reversal from the 6.5% y-o-y hike posted in December. Import growth also moderated to 3.1% y-o-y from 5.3% y-o-y in the same period.

Local currency yields fell for all tenors in the Philippines and for most tenors in most markets, except for the PRC, the Republic of Korea and Thailand, which were mixed. The fall in yields largely tracked US yields, following indications that the Federal Reserve would slow down or pause in its rate hikes. The 2-year versus 10-year yield spread fell for most markets except in Hong Kong, China and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 28 January 2019

The Republic of Korea's gross domestic product (GDP) growth increased to 3.1% year-on-year (y-o-y) in the fourth quarter (Q4) of 2018 from 2.0% y-o-y in the third quarter (Q3). On a quarter-on-quarter basis, the Republic of Korea's economy grew 1.0% in Q4 2018. For full-year 2018, the Republic of Korea posted annual growth of 2.7%. The Philippine economy, as measured by its GDP, expanded 6.1% y-o-y in Q4 2018, which was slower than the 6.5% y-o-y growth posted during the same period in 2017 but faster than the 6.0% y-o-y growth in Q3 2018. For full-year 2018, the economy of the Philippines grew 6.2%. Similarly, the People's Republic of China's (PRC) GDP grew 6.4% y-o-y in Q4 2018, down from growth of 6.5% y-o-y in Q3 2018. For full-year 2018, the PRC's GDP grew 6.6%.

In its monetary policy meeting held on 22–23 January, the Monetary Board of the Bank of Japan (BOJ) left unchanged its current monetary policy. The BOJ said that it would maintain a –0.1% target for its short-term policy rate, and continue its government bond purchase program to keep the 10-year yield at zero, and allow volatility in yield movements. The BOJ said that it expects the domestic economy to continue its expansion in 2019 in line with previous forecasts. Bank Negara Malaysia maintained the overnight policy rate at 3.25% in its meeting on 24 January, citing that the Malaysian economy is expected to remain on a steady growth path in 2019 as the latest indicators point toward sustained economic expansion.

Japan reported a trade deficit of JPY55.3 billion for the month of December, down from JPY737.7 billion in November. For full-year 2018, Japan reported a trade deficit of JPY1.2 trillion, after 2 years of having an annual trade surplus.

The PRC's industrial production grew 5.7% y-o-y in December after rising 5.4% y-o-y in the previous month. Manufacturing output in Singapore increased 2.7% y-o-y in December, down from the 7.6% y-o-y growth recorded in November. On a seasonally-adjusted month-on-month basis, manufacturing output decreased 5.6%, a reversal from the growth of 3.1% in November.

Prices of basic goods and services in Singapore jumped 0.5% y-o-y in December after a 0.3% y-o-y increase in November. The Monetary Authority of Singapore's measure of core inflation, which excludes accommodation and private road transport costs, was 1.9% y-o-y. For full-year 2018, Singapore's inflation averaged 0.4% y-o-y, which was lower than the 0.6% y-o-y recorded in 2017. Malaysia's consumer price inflation was 0.2% y-o-y in December, the same as in November. For full-year 2018, consumer prices grew 1.0% y-o-y in Malaysia. On a monthly basis, inflation was 0.1% in December. Core inflation in December was 0.4% y-o-y, which was slightly lower compared to 0.5% y-o-y in November. Consumer prices in Hong Kong, China rose 2.5% y-o-y in December, moderating from inflation of 2.6% y-o-y in November. For full-year 2018, the underlying inflation rate in Hong Kong, China stood at 2.6%.

Local currency government bond yields increased for most tenors for most economies, with all tenors increasing for Singapore. Yields decreased for most tenors in Hong Kong, China; the Philippines; and Thailand, while they were mixed for the Republic of Korea. Yield spreads between the 2-year and 10-year tenors expanded for most economies except for the Republic of Korea, Singapore, and Thailand.

Key Developments in Asian Local Currency Markets

Issue: 21 January 2019

Japan’s November industrial production was revised upward to 1.5% year-on-year (y-o-y) from the preliminary estimate of 1.4% y-o-y due to upward revisions in the production of chemicals, electrical machinery, and information and communication electronics equipment. Growth in shipments was also revised upward to 0.9% y-o-y from an earlier estimate of 0.7% y-o-y, while inventory growth was revised downward to 0.6% y-o-y from 0.7% y-o-y.

Growth in the prices of basic goods and services in Japan slowed to 0.3% y-o-y in December from the 0.8% y-o-y growth recorded in November on downward price adjustments for food items, transportation and communication, and housing. On a month-on-month basis, Japan’s consumer price inflation dropped 0.3%.

Bank Indonesia’s Board of Governors left the 7-day reverse repurchase rate unchanged at 6.00%, the deposit facility rate at 5.25%, and the lending facility rate at 6.75% in its meeting on 16–17 January. The rates are deemed consistent with efforts to bring the current account deficit within the threshold of 2.5% of gross domestic product and to maintain the attractiveness of the domestic financial market.

The People’s Republic of China’s (PRC) exports contracted 4.4% y-o-y in December after a 3.9% y-o-y gain in November. Imports also fell 7.6% y-o-y in December after rising 2.9% y-o-y in November. The PRC reported a trade surplus of USD57.1 billion in December. In Indonesia, export growth slowed to 4.6% y-o-y in December from 2.8% y-o-y in the prior month, and import growth moderated to 1.2% y-o-y from 11.8% y-o-y in the same period. The trade deficit in December narrowed to USD1.1 billion in December from USD2.0 billion in November. Singapore’s non-oil domestic exports declined 8.5% y-o-y in December following a contraction of 2.8% y-o-y in the previous month, with both electronic and nonelectronic exports showing declines.

The Philippines recorded a balance of payments surplus of USD2.4 billion in December 2018. Despite the December surplus, the economy posted an overall balance of payments deficit of USD2.3 billion in full-year 2018, up from the USD0.9 billion deficit in 2017 due to a larger merchandise trade deficit brought about by imports of raw materials, intermediate goods, and capital goods needed for the country’s economic activities.

The Government of Malaysia plans to sell samurai bonds amounting to JPY200 billion in the next few months, with the proceeds to be used to retire some of the costly loans taken by the previous administration, according to Prime Minister Mahathir Mohamad. The bond will have an indicative coupon rate of less than 0.65% per annum.

Foreign investors continued buying in the Republic of Korea’s local currency bond market in December. Foreign investors bought a net KRW1.5 billion of listed bonds compared with a net sale of KRW1,066 billion in December 2017.

Last week, local currency government bond yields went up for most tenors in Hong Kong, China; Indonesia; Singapore; and Thailand while it went down for most tenors in the PRC, Malaysia, and Viet Nam. Yields for all tenors increased in the Republic of Korea while it decreased in the Philippines. The spread between the 2-year and 10-year maturities narrowed for all emerging East Asian markets except for Indonesia, the Republic of Korea, the Philippines, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 14 January 2019

Last week, the Philippines raised USD1.5 billion from the sale of 10-year global bonds priced at 110 basis points above benchmark United States (US) Treasuries. The bonds carry a coupon rate of 3.75%. The issuance was strategically announced, riding on the back of positive market sentiment driven by strong US employment data released on 4 January. With the issuance, the Philippines became the first emerging market to offer offshore US dollar bonds this year. Proceeds from the bond sale will be used for general purposes and budgetary support.

Japan’s current account surplus narrowed to JPY757.2 billion in November from JPY1.3 trillion in October. In the Republic of Korea, the current account surplus narrowed to USD5.1 billion in November from USD9.2 billion in October.

The Philippines’ trade deficit reached USD3.9 billion in November, up from USD3.3 billion in the same month in the previous year. Exports declined 0.3% year-on-year (y-o-y), a reversal from the 14.2% y-o-y increase posted in November 2017.

Malaysia’s industrial production in November increased 2.5% y-o-y, slowing from 4.3% y-o-y growth in October. The deceleration was due to a slowdown in manufacturing output, which grew 3.6% y-o-y in November versus 5.4% y-o-y in the previous month. In addition, the mining sector registered a decline in output of 0.7% y-o-y. On the other hand, output from the electricity sector expanded 3.2% y-o-y in November versus 2.8% y-o-y in October.

Consumer prices in the People’s Republic of China’s (PRC) rose 1.9% y-o-y in December after climbing 2.2% y-o-y in November. By category, the fastest increase in the PRC’s consumer price inflation came from food and medical products and services, with both rising 2.5% y-o-y. For full-year 2018, consumer prices rose 2.1%. The PRC’s producer prices, on the other hand, rose at a slower pace in December of 0.9% y-o-y versus 2.7% y-o-y in November. For full-year 2018, producer prices rose 3.5%.

Foreign reserves in Hong Kong, China; and Indonesia rose in December, while it declined in Malaysia Hong Kong, China’s foreign reserves amounted to USD424.6 billion at the end of December, up from USD423.2 billion in November. In Indonesia, foreign reserves climbed to USD120.7 billion at the end of December from USD117.2 billion a month earlier. Bank Negara Malaysia’s international reserves at the end of December amounted to USD101.4 billion, the lowest level of the year and down from USD102 billion at the end of November.

The Government of Indonesia is targeting to raise IDR5.0 trillion from the sale of savings retail bonds to be known as SBR-005. The offer period commenced on 10 January and will end on 24 January. The bonds will have a maturity of 2 years and carry an initial coupon rate of 8.15%.

Last week, local currency government bond yields declined for all tenors in the Philippines and Viet Nam, and for most maturities in the PRC and Indonesia. In contrast, bond yields gained for most maturities in the Republic of Korea, Singapore, and Thailand. Bond yields were mixed in Hong Kong, China and Malaysia. The spread between the 2-year and 10-year maturities widened for most emerging East Asian markets except for Indonesia and the Philippines.

Key Developments in Asian Local Currency Markets

Issue: 17 December 2018

The monetary board of the Bangko Sentral ng Pilipinas decided to keep its key policy rates steady during its final meeting for the year on 13 December 2018. The overnight reverse repurchase rate remained at 4.75% while the overnight lending and overnight deposit rates are 5.25% and 4.25%, respectively. The decision came amid easing inflation: the prices of basic goods and services rose 6.0% y-o-y in November, down from 6.7% y-o-y in October. The easing was attributed to easing food supply pressures and nonmonetary policy measures starting to take effect.

The Cabinet Office revised the estimated magnitude of the contraction in Japan’s economy in the third quarter (Q3) of 2018 to 0.6% quarter-on-quarter (q-o-q) from a previous estimate of 0.3% q-o-q. The accelerated contraction was primarily driven by the revised decline in private nonresidential investment of 2.8% q-o-q from a previous estimate of 0.2% q-o-q. The declines in private consumption and public investment also worsened to 0.2% q-o-q and 2.0% q-o-q, respectively, from 0.1% q-o-q and 1.9% q-o-q. On an annualized basis, Japan’s economy contracted 2.5% in Q3 2018 compared with a preliminary estimate of 1.2% q-o-q. This was a reversal from the robust growth of 3.0% in the second quarter of 2018.

Consumer prices in the People’s Republic of China (PRC) rose 2.2% y-o-y in November after gaining 2.5% y-o-y in October. The slower y-o-y increase was mostly driven by a smaller increase in food, tobacco, and liquor prices, which rose 2.5% y-o-y in November versus 2.9% y-o-y in October. Producer prices in the PRC followed a similar trend, with prices rising 2.7% y-o-y in November after climbing 3.3% y-o-y in October.

The PRC’s export growth slowed to 5.4% y-o-y in November from 15.5% y-o-y in October. The PRC reported a trade surplus of USD44.7 billion in November from USD34.8 billion in October. The Philippines’ trade deficit increased to USD4.2 billion in October from USD2.6 billion in October 2017.

The PRC’s industrial production grew 5.4% y-o-y in November after rising 5.9% y-o-y in October. Malaysia’s industrial production growth nearly doubled in October to 4.2% y-o-y from 2.3% y-o-y in September, with all production indices recording growth during the month. Hong Kong, China’s industrial production grew 1.2% y-o-y in Q3 2018 after rising 1.6% q-o-q in the prior quarter.

The PRC’s fixed asset investment rose 5.9% y-o-y in the first 11 months of the year after a 5.7% y-o-y gain in the first 10 months. By sector, the fastest increase came from primary industry, where fixed asset investment grew 12.2% y-o-y, followed by secondary industry, where such investment grew 6.2% y-o-y. Fixed asset investment in tertiary industry grew 5.6% y-o-y in the first 11 months of the year.

The 17 December issue of the Weekly Debt Highlights is the last issue for 2018. Issuance will resume on 14 January 2019.

Local yields rose for most tenors in nearly all markets, except for the Republic of Korea and Singapore, while the 2-year versus 10-year yield spread also rose for nearly all markets except in the PRC, Philippines and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 10 December 2018

Consumer price inflation slightly rose in Indonesia to 3.23% year-on-year (y-o-y) in November from 3.16% y-o-y in October, marking the second-consecutive month of an uptick in inflation. Among the major expenditure groups, food and processed food accounted for the largest increase. In the Republic of Korea, consumer price inflation in November was unchanged from the previous month at 2.0% y-o-y. The faster price increases in most commodity groups were offset by slowing inflation in food and nonalcoholic beverages, and transport. In the Philippines, consumer price inflation eased to 6.0% y-o-y in November from 6.7% y-o-y in October as inflation for food and nonalcoholic beverages slowed on a stable supply of rice. Thailand’s consumer price inflation increased 0.9% y-o-y in November. While Thailand has experienced 17 consecutive months of consumer price inflation, it has been slowing since August. Lower transportation prices mainly contributed to the deceleration, partially offsetting the upward price adjustments for fresh food products.

Based on preliminary estimates from the Bank of Korea, the Republic of Korea’s real gross domestic product growth grew 2.0% y-o-y and 0.6% quarter-on-quarter in in the third quarter of 2018, which was in line with advance estimates released earlier. This was a slowdown from the 2.8% y-o-y growth posted in the second quarter.

Malaysia’s exports in October amounted to MYR96.4 billion on growth of 17.7% y-o-y, accelerating from 6.5% y-o-y in September. Imports recovered in October to reach MYR80.1 billion, increasing 11.4% y-o-y after declining 2.8% y-o-y in the preceding month. Malaysia’s trade surplus amounted to MYR16.3 billion in October, up from MYR15.2 billion in September.

The Republic of Korea’s current account surplus slightly narrowed to USD9.2 billion in October from USD10.8 billion in September. The smaller surplus resulted from the decline in the goods account surplus to USD11.0 billion in October from USD13.3 billion in the previous month as imports rose faster than exports on a month-on-month basis.

Singapore’s Purchasing Managers Index (PMI) declined to 51.5 in November from 51.9 in October. Slower growth was recorded in the subindexes for new exports, output, and inventory. Also contributing to the slower expansion in manufacturing was the contraction in the electronics sector’s output, with its PMI falling to 49.9 from 50.5 in the previous month.

The Government of Indonesia tapped the global bond market last week, taking advantage of improved market sentiments generated by the recently announced trade truce between the United States and the People’s Republic of China. The bond sale formed part of prefunding for the government’s 2019 state budget. The government raised a total of USD3.0 billion, comprising (i) USD750 million of 5-year bonds, (ii) USD1.25 billion of 10-year bonds, and (iii) USD1.0 billion of 30-year bonds.

Local currency government bond yields fell for all tenors in Malaysia; and most tenors in Hong Kong, China; the Republic of Korea; the Philippines; Singapore; Thailand; and Viet Nam. Yields rose for most tenors in Indonesia. Meanwhile, yield movements were mixed in the PRC. The yield spread between the 2-year and 10-year tenors narrowed for most markets in the region except in the PRC and Indonesia.

Key Developments in Asian Local Currency Markets

Issue: 03 December 2018

At its monetary policy meeting on 30 November, the Bank of Korea raised its base rate by 25 basis points to 1.75%. The Bank of Korea noted that the domestic economy is growing at its potential level and will continue to do so, which is consistent with forecasts made in October. Given manageable inflation and economic growth being sustained at its potential level, the Bank of Korea will maintain its accommodative monetary stance.

Prices of basic goods and services in Viet Nam rose 3.5% year-on-year (y-o-y) in November, which was slower than the 3.9% y-o-y growth recorded in October. On a month-on-month (m-o-m) basis, consumer price inflation contracted 0.3%. Core inflation for November increased marginally to 1.72% y-o-y from 1.67% y-o-y in October.

Hong Kong, China’s merchandise exports rose 14.6% y-o-y to HKD384 billion in October, accelerating from growth of 4.5% y-o-y in September. On the other hand, merchandise imports rose 13.1% y-o-y to HKD428 billion in October, accelerating from growth of 4.8% y-o-y in September. As exports rose faster than imports, the trade deficit narrowed to HKD44 billion in October from HKD48 billion in September. Viet Nam registered a trade deficit of USD400 million in November as imports outpaced exports, reversing the trade surplus of USD200 million posted in November 2017. For the January–November period, the trade balance posted a surplus of USD6,806 million.

Japan’s industrial production rose 4.2% y-o-y in November. On a m-o-m basis, Japan’s industrial production rose 2.9%. Singapore’s manufacturing output expanded 4.3% y-o-y in October, a reversal from the contraction of 0.1% y-o-y in September. On a m-o-m basis, manufacturing output grew 2.0%. Viet Nam’s industrial production grew 9.6% y-o-y in November compared with 7.7% y-o-y in October. On a m-o-m basis, growth in industrial production eased to 2.9%. For the January– November period, industrial production increased 10.1% y-o-y.

The People’s Republic of China’s Purchasing Managers Index for manufacturing fell to 50.0 in November from 50.2 in October, while the nonmanufacturing index fell to 53.4 from 54.9 during the same period.

The Philippines recorded a budget deficit of PHP59.9 billion in October, which was smaller than the PHP96.2 billion deficit posted the previous month but larger than the deficit of PHP21.8 billion in October 2017. For the January–October period, the budget deficit stood at PHP438.1 billion, or 83.7% of the PHP523.7 billion full-year 2018 deficit program.

The Bureau of the Treasury of the Philippines fully awarded the reissuance of 7-year Treasury bonds last week , awarding PHP15.0 billion of the PHP62.2 billion in total offers. Due to strong demand, the Bureau of the Treasury also offered the bonds through its tap facility window to the 10 Government Securities Eligible Dealer Market Makers, awarding another PHP15.0 million.

Local currency government bond yields decreased for most tenors for most economies, with all tenors decreasing for Viet Nam. Yields increased for most tenors in Hong Kong, China. Yield spreads between the 2-year and 10-year tenors contracted for most economies except for Indonesia, Singapore, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 26 November 2018

Local currency government bond yields in most emerging East Asian markets rose between 31 August and 15 October on the back of continued interest rate hikes by the United States Federal Reserve, according to the latest Asia Bond Monitor. The report also noted that emerging East Asia's local currency bond market expanded 4.3% quarter-on-quarter to reach a size of USD12.8 trillion at the end of September. The latest issue of the Asia Bond Monitor includes an analysis on the impact of the Asian Bond Markets Initiative on the region’s bond market development, a special chapter detailing the results from the AsianBondsOnline annual bond market liquidity survey, and three special discussion boxes. A copy of the full report is available at /abm.php.

Singapore’s economy grew 2.2% year-on-year (y-o-y) in the third quarter (Q3) of 2018, easing from 4.1% y-o-y growth in the previous quarter, spurred by a slowdown in the manufacturing sector as well as the finance and insurance sectors. The slower growth rates in these sectors were partially offset by an expansion of the transport and storage sector, and a moderation of the contraction in the construction sector. Thailand’s economy grew 3.3% y-o-y in Q3 2018, easing from 4.6% y-o-y growth in the previous quarter, due to weakened external demand. All expenditure components of gross domestic product exhibited growth during the period except exports, which declined 0.1% y-o-y in Q3 2018, reversing the 6.8% y-o-y growth posted in the previous quarter amid the protracted trade tensions between the People’s Republic of China (PRC) and the United States.

Hong Kong, China’s consumer price inflation held steady at 2.7% y-o-y in October due to slowing increases in the prices of fresh vegetables and package tour charges. Consumer price inflation in Japan inched up to 1.4% y-o-y in October from 1.2% y-o-y driven by faster rise in food prices. Malaysia’s consumer price inflation accelerated to 0.6% y-o-y in October from 0.3% y-o-y in September, lifted by higher y-o-y price adjustments for food and nonalcoholic beverages, restaurants and hotels, and transport. Prices of basic goods and services in Singapore increased 0.7% y-o-y in October, maintaining the previous month’s pace as accelerated price increases for electricity and gas were offset by slower growth in the prices of food items, retail items, and a decline in private road transport costs.

Japan posted a trade deficit of JPY449 billion in October, a reversal from the JPY279 billion surplus registered in October 2017, as imports rose at a faster pace than exports.

The overall balance of payments of the Philippines registered a smaller deficit of USD458 million in October compared with USD2,696 million in the previous month, but was higher than the USD368 million deficit posted in October 2017.

Last week, local government bond yields declined for most tenors in the PRC, Indonesia, the Republic of Korea, the Philippines, Singapore and Malaysia; rose for most tenors in Hong Kong, China, and Malaysia; and for all tenors in Viet Nam. The yield spread between 2-year and 10-year tenors narrowed in all emerging East Asian markets except in the PRC and Malaysia.

Key Developments in Asian Local Currency Markets

Issue: 19 November 2018

Hong Kong, China’s gross domestic product (GDP) expanded 2.9% year-on-year (y-o-y) in the third quarter (Q3) of 2018, driven largely by goods exports. Japan’s economy contracted 0.3% quarter-on-quarter (q-o-q) in Q3 2018, based on preliminary estimates, reversing the 0.8% q-o-q growth posted in the second quarter (Q2). The contraction in Japan’s economy can be attributed to recent natural disasters and the impact of the trade tensions between the United States and the People’s Republic of China (PRC). The Malaysian economy expanded 4.4% y-o-y in Q3 2018, slowing from 4.5% y-o-y growth in Q2 2018 and 6.2% y-o-y in Q3 2017. Private consumption supported growth on the expenditure side, while on the production side the services and manufacturing sectors supported the expansion.

The Board of Governors of Bank Indonesia decided to raise its 7-day reverse repurchase rate by 25 basis points to 6.00% during its meeting on 14–15 November. The rate hike was undertaken to help lower the current account deficit, strengthen the Indonesian rupiah, and maintain the attractiveness of Indonesia’s financial market. The Monetary Policy Board of the Bangko Sentral ng Pilipinas hiked its key interest rates by 25 basis points on 15 November due to expectations of high inflation. The Monetary Policy Committee of the Bank of Thailand decided to maintain the benchmark policy rate at 1.50% during its meeting on 14 November. The committee stated that, despite the current stance, the need for accommodative monetary policy would gradually decline.

Industrial production growth in the PRC inched up to 5.9% y-o-y in October from 5.8% y-o-y in September, with all major categories registering expansions.

Export growth in Indonesia reached 3.6% y-o-y in October and imports grew at a much faster pace of 23.7% y-o-y. Exports totaled USD15.8 billion and imports were USD17.6 billion, resulting in a wider trade deficit amounting to USD1.8 billion. Singapore’s non-oil domestic exports increased 8.3% y-o-y in October, solely driven by gains in nonelectronic exports.

Malaysia’s current account surplus fell to MYR3.8 billion in Q3 2018 due to a widening of the primary income deficit of MYR15 billion.

Foreign flows into the Republic of Korea’s local currency bond market were negative for a second consecutive month in October, albeit to a lesser degree than in the previous month.

Last week in Viet Nam, the National Assembly approved the 2019 state budget allocation. Revenue collection is estimated to exceed VND1,411 quadrillion and expenditures are expected to exceed VND1,019 quadrillion.

We are pleased to invite you to attend the release of the November issue of the Asia Bond Monitor, which will be launched at a conference organized by The Asset on 20 November in Singapore. For further details, please see Events page.

The yields on local government bonds declined for most tenors last week in the PRC; Hong Kong, China; Indonesia; Singapore; and Thailand. Yields for most tenors in Malaysia increased while it decreased for all tenors in Viet Nam. In the Republic of Korea and the Philippines, yield movements were mixed. The spread between the 2-year and 10-year maturities declined in all emerging East Asian markets except in Malaysia and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 12 November 2018

Despite the monetary tightening stance of Bank Indonesia exhibited this year, the Indonesian economy managed to expand more than 5.0% in the third quarter (Q3) of 2018. Real gross domestic product (GDP) growth reached 5.2% year-on-year (y-o-y) in Q3 2018, down slightly from the 5.3% y-o-y growth posted in the previous quarter due to a slowdown in household consumption and a weaker trade performance. On a quarter-on-quarter basis, real GDP growth eased to 3.1% in Q3 2018. In the Philippines, GDP grew 6.1% y-o-y in Q3 2018, which was slower than the 6.2% y-o-y growth posted in the second quarter of 2018. One of the factors affecting the slowdown was household consumption growth of 5.2% y-o-y in Q3 2018 versus 5.9% y-o-y in the previous quarter. Among major sectors, services and industry grew 6.9% y-o-y and 6.2% y-o-y, respectively, while agriculture declined 0.4% y-o-y. On a seasonally adjusted quarter-on-quarter basis, GDP grew 1.4% in Q3 2018.

Malaysia’s Index of Industrial Production increased 2.3% y-o-y in September, slightly accelerating from 2.2% y-o-y in August. The increase was underpinned by an output expansion in the manufacturing and electricity sectors, while a decline in mining sector output tempered growth.

The Monetary Policy Committee of Bank Negara Malaysia left the benchmark overnight policy rate unchanged at 3.25% during its meeting on 8 November. Malaysia’s economy is expected to remain on a steady growth path, supported by continued expansion in private sector activity. Protracted trade tensions remained a key downside risk to the domestic and global economies.

Consumer prices in the People’s Republic of China (PRC) rose 2.5% y-o-y in October, the same pace as in September. The fastest y-o-y increase came from food prices, which rose 3.3% y-o-y. In the Philippines, the prices of basic goods and services increased 6.7% y-o-y in October, the same growth recorded in the previous month.

Exports from Malaysia registered growth of 6.7% y-o-y in September, while imports declined 2.7% y-o-y. A trade surplus of MYR15.3 billion was recorded in September. In the Philippines, exports declined 2.6% y-o-y while imports soared 26.1% y-o-y in September. As a result, the trade deficit widened to USD3.9 billion in September, more than twice as much as the USD1.8 billion deficit recorded in September 2017.

Japan’s current account surplus slightly narrowed to JPY1.82 trillion in September from JPY1.84 trillion in August. In the Republic of Korea, the current account surplus widened to USD10.8 billion in September from USD8.4 billion in August.

On 5 November, Bank Indonesia and the Monetary Authority of Singapore established a bilateral financial arrangement amounting to an equivalent of USD10 billion. The arrangement allows Bank Indonesia and the Monetary Authority of Singapore to swap currency with each other.

Last week, local currency government bond yields in emerging East Asia declined for all tenors in the Republic of Korea and for most tenors in the PRC, Indonesia, Malaysia, the Philippines, and Thailand. On the other hand, bond yields edged higher for most maturities in Hong Kong, China; Singapore, and Viet Nam. The spread between the 2-year and 10-year maturities declined for all emerging East Asian markets except for the PRC; Hong Kong, China; and Thailand.

Key Developments in Asian Local Currency Markets

Issue: 05 November 2018

The Republic of Korea’s real gross domestic product grew 2.0% year-on-year (y-o-y) in the third quarter (Q3) of 2018, easing from the 2.8% y-o-y growth posted in the second quarter (Q2), based on advance estimates by the Bank of Korea. All other industries posted lower annual increases in Q3 2018 compared with the previous quarter. On a quarter-on-quarter basis, the Republic of Korea’s economy expanded 0.6% in Q3 2018, unchanged from the growth posted in Q2 2018.

In a meeting held on 22–23 October, the Board of Governors of Bank Indonesia decided to keep the 7-day reverse repurchase rate steady at 5.75%. The deposit facility rate (5.00%) and lending facility rate (6.50%) were also left unchanged.

Consumer prices in Hong Kong, China rose 2.7% y-o-y in September, accelerating from the 2.3% y-o-y pick-up in August. The underlying inflation rate rose to 3.1% y-o-y in September, compared with 2.6% y-o-y in August. On a seasonally adjusted month-on-month basis, the average monthly inflation rate for the 3-month period from July to September held steady at 0.2%, the same as the pace from June to August. Similarly, Malaysia’s consumer price inflation increased 0.3% y-o-y in September, marginally increasing from August when it hit a 42-month low of 0.2% y-o-y. September’s core inflation increased 0.3% y-o-y, reversing a 0.2% y-o-y decrease in August. The growth of prices of basic goods and services in Singapore was unchanged at 0.7% y-o-y in September. Monetary Authority of Singapore core inflation eased to 1.8% y-o-y from 1.9% y-o-y in the previous month.

The manufacturing output of Singapore decreased 0.2% y-o-y in September, a reversal from the growth of 1.9% y-o-y in August. On a month-on-month basis, Singapore’s manufacturing output declined 4.9%.

Exports of goods in Hong Kong, China rose 4.5% y-o-y in September, reaching HKD375 billion after decelerating from 13.1% y-o-y growth in August. Imports of goods rose 4.8% y-o-y in September, reaching HKD423 billion in September, likewise decelerating from 16.4% y-o-y in August. The trade deficit, however, narrowed to HKD48 billion in September from HKD52 billion in August.

The budget deficit of the Philippines ballooned to PHP96.2 billion in September from PHP36.9 billion during the same month in 2017. From January to September, the country’s total budget deficit was PHP378.2 billion, comprising 72% of the government’s PHP523.7 billion programmed deficit for 2018.

Local currency government bond yields decreased for most tenors for most economies, with all tenors increasing for Viet Nam. Yields increased for most tenors in Malaysia and Thailand, while results were mixed for Hong Kong, China and the Republic of Korea. Yield spreads between the 2-year and 10-year tenors contracted for most economies except for Indonesia, Malaysia, and the Philippines, while they were unchanged for the People’s Republic of China.

Key Developments in Asian Local Currency Markets

Issue: 29 October 2018

The Republic of Korea’s real gross domestic product grew 2.0% year-on-year (y-o-y) in the third quarter (Q3) of 2018, easing from the 2.8% y-o-y growth posted in the second quarter (Q2), based on advance estimates by the Bank of Korea. All other industries posted lower annual increases in Q3 2018 compared with the previous quarter. On a quarter-on-quarter basis, the Republic of Korea’s economy expanded 0.6% in Q3 2018, unchanged from the growth posted in Q2 2018.

In a meeting held on 22–23 October, the Board of Governors of Bank Indonesia decided to keep the 7-day reverse repurchase rate steady at 5.75%. The deposit facility rate (5.00%) and lending facility rate (6.50%) were also left unchanged.

Consumer prices in Hong Kong, China rose 2.7% y-o-y in September, accelerating from the 2.3% y-o-y pick-up in August. The underlying inflation rate rose to 3.1% y-o-y in September, compared with 2.6% y-o-y in August. On a seasonally adjusted month-on-month basis, the average monthly inflation rate for the 3-month period from July to September held steady at 0.2%, the same as the pace from June to August. Similarly, Malaysia’s consumer price inflation increased 0.3% y-o-y in September, marginally increasing from August when it hit a 42-month low of 0.2% y-o-y. September’s core inflation increased 0.3% y-o-y, reversing a 0.2% y-o-y decrease in August. The growth of prices of basic goods and services in Singapore was unchanged at 0.7% y-o-y in September. Monetary Authority of Singapore core inflation eased to 1.8% y-o-y from 1.9% y-o-y in the previous month.

The manufacturing output of Singapore decreased 0.2% y-o-y in September, a reversal from the growth of 1.9% y-o-y in August. On a month-on-month basis, Singapore’s manufacturing output declined 4.9%.

Exports of goods in Hong Kong, China rose 4.5% y-o-y in September, reaching HKD375 billion after decelerating from 13.1% y-o-y growth in August. Imports of goods rose 4.8% y-o-y in September, reaching HKD423 billion in September, likewise decelerating from 16.4% y-o-y in August. The trade deficit, however, narrowed to HKD48 billion in September from HKD52 billion in August.

The budget deficit of the Philippines ballooned to PHP96.2 billion in September from PHP36.9 billion during the same month in 2017. From January to September, the country’s total budget deficit was PHP378.2 billion, comprising 72% of the government’s PHP523.7 billion programmed deficit for 2018.

Local currency government bond yields decreased for most tenors for most economies, with all tenors increasing for Viet Nam. Yields increased for most tenors in Malaysia and Thailand, while results were mixed for Hong Kong, China and the Republic of Korea. Yield spreads between the 2-year and 10-year tenors contracted for most economies except for Indonesia, Malaysia, and the Philippines, while they were unchanged for the People’s Republic of China.

Key Developments in Asian Local Currency Markets

Issue: 22 October 2018

The Monetary Authority of Singapore slightly increased the slope of the Singapore dollar nominal effective exchange rate policy band last week, leaving its width and center unchanged. The decision was made amid expectations of continued (albeit slower) economic growth, a gradual rise in core inflation, and a pick-up in imported inflation due to higher oil and food prices.

Singapore’s economic growth eased in the third quarter of 2018 to 2.6% year-on-year (y-o-y) from the 4.1% y-o-y growth recorded in the second quarter. Manufacturing growth moderated to 4.5% y-o-y from 10.6% y-o-y during the review period and construction output contracted 3.1% y-o-y, following a 4.2% y-o-y contraction in the previous quarter, due to weakness in public sector construction.

Malaysia’s Index of Industrial Production growth slowed in August to 2.2% y-o-y from 2.6% y-o-y in July due to slower output growth in the manufacturing and electricity sector, while output growth in the mining sector remained negative.

The People’s Republic of China’s exports expanded 14.5% y-o-y in September, accelerating from 9.1% y-o-y growth in August, while import growth eased to 14.3% y-o-y from 19.9% y-o-y. The trade surplus widened to USD32 billion in September from USD27 billion in the previous month. Philippine exports expanded 3.1% y-o-y in August, up from 0.3% y-o-y, while import growth eased to 11.0% y-o-y from 31.6% y-o-y in July. The trade deficit narrowed to USD3,514 million from USD3,546 million during the review period.

Japan’s current account surplus narrowed to JPY184 billion in August from JPY201 billion in July, primarily driven by a larger deficit in the goods account surplus of JPY219 billion in August versus JPY1 billion in July as exports declined while imports rose on a month-on-month basis. The Republic of Korea’s current account surplus narrowed to USD844 million in August from USD876 million in July as the goods account surplus declined to USD1,124 million from USD1,143 million in the previous month.

The official foreign reserves of Singapore reached USD291 billion in September from USD289 billion in August due to growth in gold and foreign exchange reserves, offsetting decreases in special drawing rights and the reserve position with the International Monetary Fund.

The Philippines’ reissued 5-year Treasury bonds with a coupon rate of 5.5% were partially awarded during its auction last week. Of the PHP15.7 billion demand, only PHP9.7 billion was accepted, with the average yield soaring to 7.342%.

Last week, local currency government bond yields fell for most tenors in the People’s Republic of China; Hong Kong, China; the Republic of Korea; and Malaysia; rose for most tenors in Indonesia, the Philippines and Thailand, and rose for all tenors in Viet Nam; while yield movements were mixed in Singapore. Meanwhile, the spread between 2-year and 10-year government bonds narrowed for most markets, but widened for Hong Kong, China; Indonesia; and Malaysia.

Key Developments in Asian Local Currency Markets

Issue: 15 October 2018

The Monetary Authority of Singapore slightly increased the slope of the Singapore dollar nominal effective exchange rate policy band last week, leaving its width and center unchanged. The decision was made amid expectations of continued (albeit slower) economic growth, a gradual rise in core inflation, and a pick-up in imported inflation due to higher oil and food prices.

Singapore’s economic growth eased in the third quarter of 2018 to 2.6% year-on-year (y-o-y) from the 4.1% y-o-y growth recorded in the second quarter. Manufacturing growth moderated to 4.5% y-o-y from 10.6% y-o-y during the review period and construction output contracted 3.1% y-o-y, following a 4.2% y-o-y contraction in the previous quarter, due to weakness in public sector construction.

Malaysia’s Index of Industrial Production growth slowed in August to 2.2% y-o-y from 2.6% y-o-y in July due to slower output growth in the manufacturing and electricity sector, while output growth in the mining sector remained negative.

The People’s Republic of China’s exports expanded 14.5% y-o-y in September, accelerating from 9.1% y-o-y growth in August, while import growth eased to 14.3% y-o-y from 19.9% y-o-y. The trade surplus widened to USD32 billion in September from USD27 billion in the previous month. Philippine exports expanded 3.1% y-o-y in August, up from 0.3% y-o-y, while import growth eased to 11.0% y-o-y from 31.6% y-o-y in July. The trade deficit narrowed to USD3,514 million from USD3,546 million during the review period.

Japan’s current account surplus narrowed to JPY184 billion in August from JPY201 billion in July, primarily driven by a larger deficit in the goods account surplus of JPY219 billion in August versus JPY1 billion in July as exports declined while imports rose on a month-on-month basis. The Republic of Korea’s current account surplus narrowed to USD844 million in August from USD876 million in July as the goods account surplus declined to USD1,124 million from USD1,143 million in the previous month.

The official foreign reserves of Singapore reached USD291 billion in September from USD289 billion in August due to growth in gold and foreign exchange reserves, offsetting decreases in special drawing rights and the reserve position with the International Monetary Fund.

The Philippines’ reissued 5-year Treasury bonds with a coupon rate of 5.5% were partially awarded during its auction last week. Of the PHP15.7 billion demand, only PHP9.7 billion was accepted, with the average yield soaring to 7.342%.

Last week, local currency government bond yields fell for most tenors in the People’s Republic of China; Hong Kong, China; the Republic of Korea; and Malaysia; rose for most tenors in Indonesia, the Philippines and Thailand, and rose for all tenors in Viet Nam; while yield movements were mixed in Singapore. Meanwhile, the spread between 2-year and 10-year government bonds narrowed for most markets, but widened for Hong Kong, China; Indonesia; and Malaysia.

Key Developments in Asian Local Currency Markets

Issue: 08 October 2018

Manufacturing activity in the People’s Republic of China (PRC) slowed in September, as evidenced by the narrowing of the Purchasing Managers Index (PMI) to 50.8 from 51.8 in August, partially due to the effect of the Mid-Autumn Festival. The nonmanufacturing sector expanded in September with a PMI of 54.9, up from 54.2 in August. The Republic of Korea’s Index of All-Industry Production increased 1.5% year-on-year (y-o-y) in August, up from 1.3% y-o-y growth in July. The PMI of Singapore declined to 52.4 in September from 52.6 in August. Easing growth for new orders and exports, as well as in stocks of finished goods, imports, inventory, and order backlogs, contributed to the lower PMI in September.

Consumer price inflation in Indonesia decelerated in September to 2.9% y-o-y from 3.2% y-o-y in August. The slowdown was due to lower prices in all components of the Consumer Price Index except for healthcare. Food items had the largest price deceleration. In Thailand, consumer price inflation increased 1.3% y-o-y in September after registering a 4-year high of 1.6% y-o-y in August. The Ministry of Commerce forecast inflation to average 1.3% in full-year 2018, up from an earlier projection of 1.2%.

Consumer prices in the Republic of Korea rose 1.9% y-o-y in September, after rising 1.4% y-o-y in August, as prices of most major commodities increased. In the Philippines, prices of basic goods and services surged 6.7% y-o-y in September, up from 6.4% y-o-y in August. The rise in prices was led by food and nonalcoholic beverages, largely due to the typhoon that hit the Philippines in September. Inflation has been steadily rising since the start of the year.

The Republic of Korea’s exports declined 8.2% y-o-y to USD50.6 billion, a reversal from the growth of 8.7% y-o-y in August, and imports declined 2.1% y-o-y to USD40.8 billion, resulting in a trade surplus of USD9.7 billion. Exports from Malaysia declined 0.3% y-o-y in August after registering growth of 9.4% y-o-y in July, while imports grew faster at 11.2% y-o-y in August versus 10.3% y-o-y in July. Despite the negative export growth and faster import growth, Malaysia posted a trade surplus of MYR1.6 billion in August.

Hong Kong, China’s local retail sales rose 9.5% y-o-y in August, following an increase of 7.8% y-o-y in July. The government noted that solid local consumption and growth in tourist arrivals contributed to the performance of the retail sector, which posted total receipts of HKD38.2 billion.

Hong Kong, China’s official foreign reserves expanded to USD426 billion at the end of September from USD425 billion at the end of August. Official foreign reserves in the Republic of Korea increased to USD403 billion at the end of September from USD401 billion at the end of August. The foreign reserves of Bank Negara Malaysia amounted to USD103 billion at the end of September, the lowest level year-to-date. The Philippines’ gross international reserves of the Philippines declined to USD75.2 billion in September from USD77.9 billion in August.

Last week, local currency government bond yields in emerging East Asia increased for all tenors in the Republic of Korea, Malaysia, and Singapore, while it increased for most tenors in Indonesia, the Philippines, and Thailand. Yield were down for most tenors in Viet Nam while yield movements in Hong Kong, China were mixed. In the PRC, yields were unchanged due to the week-long holiday. The spread between the 2-and 10-year maturities widened for most emerging East Asian markets except in the PRC where it was unchanged.

Key Developments in Asian Local Currency Markets

Issue: 01 October 2018

The United States (US) Federal Reserve last week raised its key target policy rate range by 25 basis points (bps) to between 2.00% and 2.25%. In its decision, the Federal Reserve noted that the labor market continues to improve, with strong job gains in recent months and a steady unemployment rate, while economic activity expands. In its September statement, the Federal Open Market Committee also removed past language indicating that current monetary policy was “accommodative.”

On 27 September, the Hong Kong Monetary Authority raised its base rate by 25 bps to 2.50%. In a meeting held on 26–27 September, Bank Indonesia’s Board of Governors raised the 7-day reverse repurchase rate by 25 bps to 5.75%. The rate hike is expected to lead the current account deficit to a manageable level. Bank Indonesia also introduced a new derivatives instrument, the non-deliverable forward, to help stabilize the Indonesian rupiah. Bangko Sentral ng Pilipinas decided to raise its key interest rates by 50 bps each due to inflation concerns. The overnight reverse repurchase rate now stands at 4.5%, while the overnight lending and deposit rates stand at 5.0% and 4.0%, respectively.

Consumer price inflation in Singapore marginally increased to 0.7% year-on-year (y-o-y) in August from 0.6% y-o-y in July. In Viet Nam, consumer prices climbed 4.0% y-o-y in September, due mainly to a faster increase in food prices.

Real gross domestic product growth in Viet Nam slipped to 7.0% y-o-y in the first 3 quarters of the year, after rising 7.1% y-o-y in the first 2 quarters of 2018, as growth moderated for all major industry groups except the services sector. Economic growth for the third quarter of 2018 rose to 6.9% y-o-y following a revised 6.7% y-o-y expansion in the second quarter.

Industrial production in Japan inched up 0.7% month-on-month in August, based on preliminary data from the Ministry of Economy, Trade, and Industry. In Singapore, industrial production growth eased to 3.3% y-o-y in August due to slower growth in most manufacturing clusters. Industrial production growth in Viet Nam eased to 9.1% y-o-y in September from 13.4% y-o-y in August.

Hong Kong, China’s goods exports grew 13.1% y-o-y and goods imports rose 16.4% y-o-y in August. A trade deficit valued at HKD52 billion was reported in August. In Thailand, merchandise export growth moderated to 5.8% y-o-y while import growth surged to 24.2% y-o-y. A trade surplus valued at USD604 million was posted in August. Thailand’s current account surplus reached USD753 million in August. Exports from Viet Nam rose 6.0% y-o-y in September and imports gained 8.5% y-o-y. A trade surplus valued at USD0.7 billion was recorded in September.

The Philippines recorded a budget deficit of PHP2.6 billion in August, a reversal from the budget surplus of PHP28.8 billion posted in August 2017.

Last week, local currency government bond yields in emerging East Asia declined for most markets except for Hong Kong, China, Malaysia, and the Philippines. Yields rose for all tenors in Hong Kong, China following the adjustment in its base rate while yields rose for most tenors in Malaysia and the Philippines. The spread between the 2- and 10-year maturities narrowed for most emerging East Asian markets except for Indonesia, the Philippines, and Singapore.

Key Developments in Asian Local Currency Markets

Issue: 24 September 2018

Local currency government bond yields in emerging East Asia diverged between 1 June and 15 August due to differing responses among the region’s central banks to the United States Federal Reserve’s monetary tightening and rising global economic uncertainties, according to the latest issue of the Asia Bond Monitor. The report also noted that the region’s local currency bonds outstanding reached USD12.6 trillion at the end of June, posting moderate growth of 3.2% quarter-on-quarter. The latest issue of the Asia Bond Monitor includes a discussion on the effect of global trade tensions on financial markets. A copy of the full report is available at /documents/abm_sep_2018.pdf.

At its monetary policy meeting on 18–19 September, the Monetary Board of the Bank of Japan (BOJ) maintained its monetary easing policy. The BOJ will continue to conduct its yield curve control program, keeping a target of around zero for the 10-year government bond yield, but it will allow more movement. The BOJ will also maintain its –0.1% target for the short-term policy rate. On the other hand, the Monetary Policy Committee of the Bank of Thailand maintained the 1-day repurchase rate at 1.5% in its policy-setting meeting on 19 September.

Consumer price inflation in Japan accelerated to 1.3% year-on-year (y-o-y) in August from 0.9% y-o-y in July. On a seasonally adjusted month-on-month basis, consumer prices in Japan rose 0.5% in August. On the other hand, consumer prices in Hong Kong, China rose 2.3% y-o-y in August, slightly easing from 2.4% y-o-y inflation in July. Net of the effects of the government's one-off relief measures, consumer prices rose 2.6% y-o-y in August, slightly easing from 2.7% y-o-y inflation in July. Malaysia’s consumer price inflation fell to its lowest rate in 42 months in August at 0.2% y-o-y. In July, inflation was 0.9% y-o-y. Core inflation decreased 0.2% y-o-y in August, the same rate of decline as in the previous month.

Japan posted a trade deficit of JPY445 billion in August, a reversal from the JPY97 billion surplus posted in August 2017, as imports rose at a faster pace than exports. Indonesia’s trade deficit in August narrowed to USD1.0 billion from USD2.0 billion in July.

Non-oil domestic exports from Singapore increased 5.0% y-o-y in August, down from the 11.0% y-o-y growth recorded in July.

The Philippines’ overall balance of payments position posted a surplus of USD1,272 million in August, a reversal from the deficit of USD455 million recorded in July.

Foreign net inflows into the Republic of Korea’s local currency bond market increased to KRW2.4 trillion in August from KRW1.4 trillion in July.

Local currency government bond yields increased for most tenors for most economies, with all tenors increasing for the Republic of Korea, Singapore, and Viet Nam. Yields decreased for most tenors in Indonesia and Malaysia, while results are mixed for the People’s Republic of China. Yield spreads between the 2-year and 10-year tenors contracted for all economies except for the People’s Republic of China; Hong Kong, China; the Republic of Korea; and Singapore.

Key Developments in Asian Local Currency Markets

Issue: 17 September 2018

Japan’s real annualized gross domestic product (GDP) growth in the second quarter (Q2) of 2018 was revised upward to 3.0% from a preliminary estimate of 1.9%, reversing the 0.9% contraction posted in the first quarter (Q1) of 2018. The higher growth was primarily driven by an acceleration in the annualized growth of nonresidential investment to 12.8% from a previous estimate of 5.2%. Growth in private consumption and exports also increased to 2.9% and 0.9%, respectively, from 2.8% and 0.8%. The decline in residential investment was revised to 9.3% from 10.3%, and government consumption growth was reduced to 0.8% from 0.9%.

Consumer prices in the People’s Republic of China (PRC) rose 2.3% year-on-year (y-o-y) in August after climbing 2.1% y-o-y in July. Producer prices, on the other hand, rose 4.1% y-o-y in August, down from 4.6% y-o-y in July.

The PRC posted a trade surplus of USD31.1 billion in August, up from USD28.1 billion in July. Export growth decelerated to 9.8% y-o-y in August from 12.2% y-o-y in July. Imports grew 20.0% y-o-y in August versus 27.3% y-o-y in July. The Philippines posted a trade deficit of USD3.6 billion in July was up from USD1.3 billion in July 2017.

Japan’s current account surplus widened to JPY2.1 trillion in July from JPY1.2 trillion in June. The rise was primarily driven by the jump in the primary income surplus to JPY2.4 trillion from JPY587.6 billion.

The PRC’s industrial production grew 6.1% y-o-y in August versus 6.0% y-o-y in July. Investment in fixed assets in the PRC slowed on a year-to-date basis, rising 5.3% y-o-y during January–August, down from 5.5% y-o-y during January–July.

Industrial output growth in Hong Kong, China accelereated in Q2 2018, with the index of industrial production rising 1.6% y-o-y following a 1.1% y-o-y increase in Q1 2018.

The PRC’s unemployment rate fell 0.1 percentage points between July and August to 5.0%. On a y-o-y basis, the unemployment rate also fell by 0.1 percentage points.

Last week, the Republic of Korea sold USD1.0 billion worth of foreign exchange stabilization bonds. The issue comprised USD500 million worth of 10-year bonds priced at 3.572%, a spread of 60 basis points over the 10-year US Treasury bond, and USD500 worth of 30-year bonds priced at 3.957%, a spread of 85 basis points over the 30-year US Treasury bond.

Last week, local currency government bond yields rose for all tenors in Hong Kong, China and most tenors in the PRC, the Republic of Korea, Philippines, Singapore and Thailand. Yields fell for all tenors in Viet Nam and for most tenors in Indonesia and Malaysia. The 2-year versus 10-year yield spread rose in most markets except in the PRC, Indonesia, the Republic of Korea and Malaysia.

Key Developments in Asian Local Currency Markets

Issue: 10 September 2018

In August, consumer price inflation in the Philippines surged to 6.4% year-on-year (y-o-y) from 5.7% y-o-y in July, significantly exceeding the higher-end of the central bank’s forecast range of 2.0%–4.0% for full-year 2018, due to higher prices of vegetables, fish, corn, and rice. A shortage in the supply of rice and vegetables in the aftermath of recent typhoons drove food inflation to 8.2% y-o-y in August from 6.8% y-o-y in July. Consumer price inflation in Thailand rose marginally to 1.6% y-o-y from 1.5% y-o-y in July as food price inflation quickened to 0.8% y-o-y from 0.02% y-o-y during the review period. Consumer prices in the Republic of Korea rose 1.4% y-o-y in August, easing from inflation of 1.5% y-oy in July as the acceleration of prices for food and nonalcoholic beverages was capped by slower price increases for other commodities. Consumer prices in Indonesia rose 3.2% y-o-y in August, maintaining July’s pace of inflation.

Bank Negara Malaysia maintained its overnight policy rate at 3.25% given expectations of the Malaysian economy growing on a steady path, supported by the private and external sectors, and inflation remaining relatively stable despite edging upward through 2019 with the impact of the change in consumption tax policy.

The Republic of Korea’s second quarter (Q2) of 2018 gross domestic product (GDP) growth rate was revised downward to 2.8% y-o-y from a 2.9% y-o-y advance estimate, leaving it unchanged from growth in the first quarter (Q1) of 2018 despite exports rising 4.8% y-o-y in Q2 2018, up from 3.1% y-o-y in Q1 2018.

Malaysia’s Index of Industrial Production rose 2.6% y-o-y in July, accelerating from 1.1% y-o-y in June, backed by faster output growth in the manufacturing and electricity sectors.

Singapore’s Purchasing Managers Index rose to 52.6 from 52.3 in July, spurred by increases in new exports and new orders that offset declines in inventory, stocks of finished goods, and supplier deliveries.

Exports from Malaysia grew 9.4% y-o-y in July compared with 7.6% y-o-y in June. Import growth slowed in July to 10.3% y-o-y from 14.9% y-o-y in June. Both exports and imports posted record-high values of MYR86.1 billion and MYR77.8 billion, respectively, causing the trade surplus to widen to MYR8.3 billion in July from MYR6.0 billion in June.

The Republic of Korea’s current account surplus widened to USD8.8 billion in July from USD7.4 billion in June, primarily due to the larger goods account surplus of USD11.4 billion in July versus USD10.0 billion in June, as exports grew at a faster pace than imports on a month-on-month basis.

On 2 September, Fitch Ratings affirmed Indonesia’s long-term foreign currency and local currency issuer default ratings at BBB. The ratings were given a stable outlook.

Last week, local currency government bond yields rose for all tenors in Indonesia, Malaysia, the Philippines, and Singapore; and for most tenors in the People’s Republic of China; Hong Kong, China; the Republic of Korea; Thailand; and Viet Nam. Meanwhile, yield spreads between 2-year and10-year tenors narrowed for most markets, but widened for the People’s Republic of China, Malaysia and Singapore.

Key Developments in Asian Local Currency Markets

Issue: 03 September 2018

Japan’s industrial production fell 0.1% on a month-on-month (m-o-m) basis but rose 2.3% on a year-on-year (y-o-y) basis in July, based on preliminary estimates. In the Republic of Korea, the Index of All-Industry Production rose 1.2% y-o-y in July, faster than the 0.2% y-o-y increase posted in June. The People’s Republic of China’s manufacturing Purchasing Managers Index (PMI) rose to 51.3 in August from 51.2 in July. The subindex for production rose to 53.3 from 52.2, while the subindex for new orders declined to 52.2 from 52.3 in the same period. The nonmanufacturing PMI also rose to 54.2 in August from 54.0 in July. Industrial production growth in Viet Nam eased to 13.4% y-o-y in August from 14.3% y-o-y in July. While still positive, growth for all major subindexes slowed in August.

The Bank of Korea decided to leave its base rate unchanged at 1.50% at its monetary policy meeting on 31 August. The central bank’s decision came on the back of sustained growth in the domestic economy, supported by consumption and exports, while inflation remained subdued on slowing increases for agricultural product prices and service fees.

Consumer price inflation in Viet Nam eased to 4.0% y-o-y in August from 4.5% y-o-y in July. On a m-o-m basis, however, inflation accelerated to 0.5% after decelerating 0.1% during the same period. The m-o-m inflation in August was largely driven by food prices, which climbed 0.9% from July.

Exports of goods from Hong Kong, China rose 10.0% y-o-y in July, amounting to HKD359 billion, while imports of goods grew faster than exports, rising 14.1% y-o-y to HKD406 billion. Despite imports growing faster than exports, the trade deficit narrowed to HKD47 billion in July from HKD54 billion in June. In Viet Nam, export and import growth slowed to 5.7% y-o-y and 15.5% y-o-y, respectively, in August. Viet Nam posted a trade deficit of USD100 million, down from USD635 million in July.

Export and import growth in Thailand both eased in July at 8.3% y-o-y and 12.4% y-o-y, respectively. Exports amounted to USD20.3 billion and imports amounted to USD19.4 billion, resulting in a lower trade surplus of USD858 million in July than in the previous month. Thailand also registered a smaller current account surplus of USD1.1 billion versus USD4.1 billion in the same period.

RAM Ratings upgraded the Philippines’ long-term global sovereign credit rating (GSCR) to _gBBB₂(pi) and its short-term GSCR to _gP₂(pi), both with a stable outlook, on 29 August. On the same day, RAM Ratings reaffirmed the long-term and short-term GSCRs of Singapore at _gAAA(pi) and _gP1(pi), respectively, both with a stable outlook.

Last week, local currency government bond yields were up for most tenors in Indonesia, Malaysia, and Viet Nam; and it is up for all tenors in Hong Kong, China. Meanwhile, yields were down for most tenors in the People’s Republic of China and Thailand, and for all tenors in the Republic of Korea. In the Philippines and Singapore, local currency government bond yield movements were mixed. The yield spreads between 2-year and 10-year tenors narrowed for most markets except in Indonesia, Malaysia, and Thailand.

Key Developments in Asian Local Currency Markets

Issue: 27 August 2018

Thailand’s economic performance was better than expected in the second quarter (Q2) of 2018 with gross domestic product expanding 4.6% year-on-year (y-o-y), which was a slight deceleration from first quarter (Q1) growth of 4.9% y-o-y. The growth was supported by rising private consumption, investment, and exports on the demand side, and the accelerated expansion of the agricultural sector to 10.4% y-o-y in Q2 2018 from 6.5% y-o-y in Q1 2018. For the first half of 2018, Thailand’s economy expanded 4.8% y-o-y, exceeding the higher end of the 4.2%–4.7% forecast range for 2018.

The manufacturing output of Singapore rose 6.0% y-o-y in July, easing from 8.0% y-o-y growth in June due to the decline in general manufacturing industries and a slowdown in the growth of transport engineering biomedical manufacturing and precision engineering.

Consumer price inflation in Japan inched up to 0.9% y-o-y in July from 0.7% y-o-y in June as the acceleration of food prices was dampened by declines and slower price increases of other major commodities. Consumer price inflation in Malaysia ticked up marginally to 0.9% y-o-y in July after posting a 3-year low of 0.8% y-o-y in June, following the government’s removal of the goods and services tax. Meanwhile, consumer price inflation in Singapore was unchanged at 0.6% y-o-y in July, as surging inflation in the cost of electricity and gas (from 3.7% y-o-y to 12.7% y-o-y) was offset by the decline in the cost of private transport. Consumer price inflation in Hong Kong, China was steady at 2.4% y-o-y in July, driven by the sustained rise in prices for food and utilities.

The Philippines’ cumulative balance of payment deficit for January through July widened to USD3.7 billion from USD1.4 billion in January–July 2017 due to the large merchandise trade deficit during the first half of 2018, spurred by increased imports of raw materials. This came after the balance of payments posted its seventh consecutive monthly deficit in 2018, with the July deficit amounting to USD455 million.

Expenditures of the Government of the Philippines exceeded revenues in July, producing a budget deficit of PHP86.4 billion, up from PHP50.5 billion posted in July 2017, as spending surged 34.0% y-o-y to PHP328.1 billion, offsetting the 24.0% y-o-y incease in revenues amounting to PHP241.7 billion.

Last week, Bank Indonesia reduced the minimum transaction limit for foreign exchange hedging through swaps to USD2 million from USD10 million. With the reduced floor for hedging transactions, Bank Indonesia expects the volume of hedging transactions to increase.

Last week, local currency bond yields declined for most tenors in Indonesia, the Republic of Korea, Malaysia and Singapore; and rose for most tenors in Hong Kong, China; Thailand; and Viet Nam. Yield movements were mixed in the People’s Republic of China, and the Philippines. Meanwhile, yield spreads between 2-year and 10-year tenors narrowed for most markets except the Republic of Korea, Malaysia, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 20 August 2018

In a meeting held on 14–15 August, the Board of Governors of Bank Indonesia decided to raise by 25 basis points the 7-day reverse repurchase rate to 5.50%. Corresponding adjustments were also announced for the deposit facility rate (4.75%) and lending facility rate (6.25%). The central bank raised its policy rate for a fourth time since mid-May for a cumulative hike of 125 basis points. According to Bank Indonesia, the rate hike was part of efforts to maintain the competitiveness of Indonesia’s domestic financial markets and to manage the current account deficit.

Malaysia’s gross domestic product (GDP) expanded 4.5% year-on-year (y-o-y) in the second quarter (Q2) of 2018, which was slower than the 5.4% y-o-y expansion logged in the first quarter (Q1) of 2018. On the demand side, private consumption and gross fixed capital formation supported the expansion in Q2 2018 as export growth slowed while imports reversed the negative growth posted in Q1 2018. On a quarter-on-quarter (q-o-q) seasonally adjusted basis, Malaysia’s economy expanded 0.3%. Singapore’s GDP growth eased to 3.9% y-o-y in Q2 2018 from 4.5% y-o-y in Q1 2018. The decline was due to the slower performance of the manufacturing sector, as well as most service industries. On a seasonally adjusted annualized q-o-q basis, Singapore’s GDP grew 0.6%.

Indonesia reverted to a trade deficit of USD2.0 billion in July, as imports climbed 31.6% y-o-y to reach USD18.3 billion, while exports rose 19.3% y-o-y to USD16.2 billion. Japan posted a trade deficit of JPY231 billion in July, a reversal from the JPY406 billion surplus posted in the same period in 2017, as imports rose at a faster pace than exports. Exports rose 3.9% y-o-y in July to JPY6.7 trillion, while imports posted higher growth of 14.6% y-o-y in July to JPY7.0 trillion. Singapore’s non-oil domestic exports growth expanded 11.8% y-o-y in July following marginal growth of 0.8% y-o-y in June.

Malaysia’s current account surplus narrowed to MYR3.9 billion in Q2 2018, the lowest level since Q2 2016 (MYR3.1 billion), from MYR15.0 billion in the previous quarter.

Personal remittances from overseas Filipino workers slowed to USD2.6 billion in June from USD2.8 billion in June 2017, representing a contraction of 4.9% y-o-y.

Foreign net flows into the Republic of Korea’s local currency bond market remained high at KRW1.4 trillion in July, but continued to ease from KRW2.1 trillion in June and KRW3.3 trillion in May.

Industrial production in the People’s Republic of China grew 6.0% y-o-y in July, the same rate of increase as in the previous month. In terms of the three major sectors, y-o-y growth increased most in the manufacturing segment, which grew 6.2% y-o-y in July, up from 6.0% y-o-y in June.

Local currency government bond yields rose for all tenors in Indonesia and Viet Nam; and for most tenors in the PRC; Hong Kong, China; and Thailand. Yields fell for all tenors in the Republic of Korea; and for most tenors in Malaysia, the Philippines, and Singapore. The yield spread between the 2-year and 10-year tenors widened for most markets in the region except in Hong Kong, China; the Republic of Korea; Thailand; and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 13 August 2018

The Monetary Board of the Bangko Sentral ng Pilipinas decided to hike key interest rates by 50 basis points (bps) in its 9 August meeting. As a result, the overnight lending rate now stands at 4.5% while the overnight reverse repurchase and deposit rate stand at 4.0% and 3.5%, respectively. The decision came amid continuous rising inflation, with the July inflation rate hitting 5.7% year-on-year (y-o-y), and it is still expected to stay high for the remainder of 2018. On the other hand, the Monetary Policy Committee of the Bank of Thailand decided to maintain the 1-day repurchase rate at 1.5% following their monetary policy meeting on 8 August. The decision came on the back of the domestic economic growth continuing to gain traction, underpinned by strong domestic and external demand.

Economic growth in Indonesia, as measured by the gross domestic product, climbed to 5.3% y-o-y in Q2 2018 from 5.1% y-o-y in Q1 2018. Japan’s economy expanded by an annualized rate of 1.9% in the Q2 2018, a reversal from the contraction of a 0.9% annualized rate in Q1 2018. In the Philippines, the economy grew 6.0% y-o-y in Q2 2018, slower than the 6.6% y-o-y growth recorded in Q1 2018. Hong Kong, China's economy continued to expand, with gross domestic product growing 3.5% y-o-y in Q2 2018, albeit at a slower pace than the first quarter growth of 4.6% y-o-y.

Consumer prices in the People’s Republic of China (PRC) rose 2.1% y-o-y in July, up from 1.9% y-o-y in June, due largely to faster increases in the price of food and non-food items. Similarly, prices of basic goods and services in the Philippines increased 5.7% y-o-y in July. This was higher than the 5.2% y-o-y growth posted in June.

Malaysia’s Index of Industrial Production growth slowed to 1.1% y-o-y in June after expanding 3.0% y-o-y in May. It was the slowest growth registered since July 2014.

The current account surplus of Japan dropped to JPY1,176 billion in June from JPY1,938 billion in May. For the first half of 2018, the current account surplus stood at JPY10,841 billion.

Exports from the PRC rose 12.2% y-o-y in July, after a revised 11.2% y-o-y hike in June. Import growth accelerated to 27.3% from 14.1% in the same period. A lower trade surplus was recorded in July at USD28.1 billion from USD29.0 billion a month earlier. June exports of Philippine goods stood at USD5.7 billion, a slight improvement from the 1.8% y-o-y decline in May. Imports, on the other hand, reached USD9.1 billion in June, higher than the 12.6% y-o-y growth from the previous month. For June, the Philippines registered a trade deficit of USD3.4 billion.

The Philippines has returned to the samurai bond market after 8 years, offering three tranches of its JPY154.2 billion yen-denominated bonds. It offered 3-, 5-, and 10-year samurai bonds with coupon rates of 0.38%, 0.54%, and 0.99%, respectively.

Local currency government bond yields declined for most tenors for most of the economies except for the People’s Republic of China, Thailand, and Viet Nam where most tenors rose. Yields decreased for all tenors in the Republic of Korea. Yield spreads between the 2-year and 10-year tenors expanded for all economies except for the Republic of Korea, Singapore, and Thailand.

Key Developments in Asian Local Currency Markets

Issue: 06 August 2018

At its monetary policy meeting on 30–31 July, the Bank of Japan (BOJ) announced its plan to “strengthen the framework for continuous powerful monetary easing.” The BOJ will maintain its yield curve control program, keeping a target of around zero for the 10-year government bond, but it will allow more movement. It will also maintain its –0.1% target for the short-term policy rate, but will lower the base size of one of its reserves subject to the yield target. The BOJ lowered its gross domestic product growth forecast to 1.5% year-on-year (y-o-y) for fiscal year 2018 from an April projection of 1.6% y-o-y. The central bank stated that inflation remains positive but it will take more time to reach the 2.0% target than initially expected.

Consumer prices in Indonesia rose 3.2% y-o-y in July, after gaining 3.1% y-o-y in June, due largely to higher food prices. Consumer price inflation in the Republic of Korea remained unchanged in July from the 2 previous months at 1.5% y-o-y. Consumer price inflation in Thailand climbed to 1.5% y-o-y in July after slowing to 1.4% y-o-y in June. In Viet Nam, consumer prices rose 4.5% y-o-y in July, slowing from 4.7% y-o-y in June, due largely to higher food prices.

The Republic of Korea’s current account surplus narrowed to USD7.4 billion in June from USD8.7 billion in May. Exports from Malaysia grew 7.6% y-o-y in June to reach MYR78.7 billion. Malaysia posted a trade surplus in June amounting to MYR6.0 billion. Thailand’s merchandise exports grew 10.0% y-o-y in June to reach US21.8 billion. Merchandise imports registered slightly higher growth of 12.9% y-o-y in June compared with 12.7% y-o-y in May. Thailand’s trade surplus widened to USD2.9 billion in June. In Viet Nam, a trade deficit was recorded in July amounting to USD300 million, following a trade surplus valued at USD799 million in June. Exports climbed 10.3% y-o-y in July while imports rose 13.8% y-o-y.

Industrial production in Japan fell 2.1% month-on-month in June. Industrial production growth in Viet Nam rose to 14.3% y-o-y in July from 12.3% y-o-y in June.

The People’s Republic of China’s manufacturing Purchasing Managers Index (PMI) fell to 51.2 in July from 51.5 in June, while its nonmanufacturing PMI fell to 54.0 from 55.0 in the same period. Singapore’s PMI fell to 52.3 in July from 52.5 in June.

On 1 August, Bank Indonesia launched a new interbank overnight reference rate, the Indonesia Overnight Index Average, or IndONIA. This new rate replaces the overnight Jakarta Interbank Offered Rate, or JIBOR, which will still be used as reference pricing for longer tenors.

Last week, Bank OCBC NISP raised USD150 million from the sale of green bonds. The bonds carried a maturity of 5 years and were sold solely to the International Finance Corporation. The issuance marked the first green bond from an Indonesian banking institution.

Local currency government bond yields rose for all tenors in Singapore and Viet Nam, and were mostly up in Indonesia and the Republic of Korea last week. On the other hand, yields were mostly down in the People’s Republic of China, Hong Kong, China; and Malaysia. Yield movements were mixed in the Philippines and Thailand. The spread between the 2- and 10-year maturities widened for all emerging East Asian markets except for Malaysia, the Philippines, Singapore, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 30 July 2018

The Republic of Korea’s economy grew 2.9% year-on-year (y-o-y) in the second quarter (Q2) of 2018, inching up from 2.8% y-o-y growth in the first quarter (Q1), based on an advance estimate from the Bank of Korea. The slightly higher growth was mainly driven by an acceleration in the growth of exports to 5.2% y-o-y in Q2 2018 from 1.6% y-o-y in Q1 2018. Final consumption expenditure rose 3.3% y-o-y in Q2 2018, following a 4.0% y-o-y increase in the previous quarter. Meanwhile, gross fixed capital formation contracted 1.1% y-o-y in Q2 2018, a reversal from the 3.7% y-o-y growth posted in Q1 2018. On a seasonally adjusted quarter-on-quarter basis, the Republic of Korea’s economy grew 0.7% in Q2 2018, down from 1.0% in the prior quarter.

Manufacturing output in Singapore grew 7.4% y-o-y in June, down from 12.9% y-o-y growth posted in May. All manufacturing clusters registered slower growth compared with May except for the precision engineering and transport engineering clusters. On a month-on-month basis, manufacturing output surged 3.9%.

Consumer prices in Hong Kong, China rose 2.4% y-o-y in June, up from a 2.1% y-o-y gain in May. Discounting the effects of all one-off relief measures of the government, the underlying inflation rate rose to 2.7% y-o-y in June from 2.4% y-o-y in May. In Singapore, consumer prices rose 0.6% y-o-y in June, compared with a 0.4% y-o-y hike in May. The uptick in inflation was largely attributed to higher prices of services (1.7% y-o-y) and food (1.5% y-o-y).

Hong Kong, China’s exports increased 3.3% y-o-y in June after rising 15.9% y-o-y in May, while import growth slowed to 4.4% y-o-y from 16.5% y-o-y in the same period. A trade deficit amounting to HKD54.1 billion was recorded in June. The government said that rising global trade tensions could affect Hong Kong, China’s export outlook and that further monitoring will be conducted.

The Government of the Philippines’ expenditures continued to outpace its revenues in June, resulting in a budget deficit of PHP54.3 billion. The decreased revenues were due to lower tax collections by the Bureau of Internal Revenue. In the first half of 2018, the Philippines posted a budget deficit of PHP193.0 billion, which was lower than the programmed deficit for this period.

On 23 July, Bank Indonesia resumed issuance of 9-month and 12-month central bank certificates known as Sertifikat Bank Indonesia (SBI). The issuance of conventional SBI is expected attract foreign portfolio investment into the Indonesian market and provide more diversity in the instruments being issued by the central bank. Bank Indonesia sold IDR4.2 trillion of 9-month SBI and IDR1.8 trillion of 12-month SBI last week. Since December 2016, only sharí’ah-compliant SBI had been issued on a monthly basis.

Last week, local currency government bond yields rose for all tenors in Singapore and for most tenors in Hong Kong, China; the Republic of Korea; the Philippines; and Viet Nam. On the other hand, yields mostly fell for Indonesia, Malaysia, and Thailand. Yield movements were mixed in the People’s Republic of China. The spread between the 2- and 10-year maturities widened for most emerging East Asian markets except for Indonesia, Malaysia, and Thailand.

Key Developments in Asian Local Currency Markets

Issue: 23 July 2018

The People’s Republic of China’s (PRC) gross domestic product growth rate slowed to 6.7% year-on-year (y-o-y) in the second quarter (Q2) of 2018 from 6.8% y-o-y in the first quarter (Q1). The lower growth rate was driven mainly by a slowdown in secondary industry to 6.0% y-o-y in Q2 2018 from 6.3% y-o-y in Q1 2018. The PRC’s industrial production growth also slowed to 6.0% y-o-y in June from 6.8% y-o-y in the previous month. All three major industrial production categories showed a slowdown in June. Meanwhile, the PRC’s investment in fixed assets growth slowed to 6.0% y-o-y in June from 6.1% y-o-y in May, largely driven by a decline in primary industry’s fixed investment growth rate to 13.5% y-o-y in June from 15.2% y-o-y in May.

Bank Indonesia maintained the 7-day reverse repo rate at 5.25% at its Board of Governors meeting on 18–19 July. The decision was deemed consistent with the central bank’s effort to maintain domestic financial market attractiveness amid uncertainties in the global market. Despite there being no rate hike at its July meeting, Bank Indonesia’s stance toward its monetary policy remains preemptive in order to maintain stability.

Consumer prices in Japan rose 0.7% y-o-y in June, the same pace recorded in May. Consumer price inflation in Malaysia decelerated to 0.8% y-o-y in June from 1.8% y-o-y in May, the first time inflation dipped below 1.0% in 40 months. All components of the Consumer Price Index either registered price deceleration or price declines, except for the transport group, where prices edged higher by 5.5% y-o-y in June on rising fuel prices.

Indonesia’s import and export growth slowed in June to 12.7% y-o-y and 11.5% y-o-y, respectively. Despite slower growth in exports compared with imports, Indonesia posted a trade surplus of USD1.7 billion in June, following two consecutive monthly trade deficits in April and May. In Japan, exports rose 6.7% y-o-y and imports increased 2.5% y-o-y in June, resulting in a trade surplus of JPY721 billion. Growth of Singapore’s non-oil domestic exports plummeted to 1.1% y-o-y in June from 15.5% y-o-y in May.

The Philippines posted an overall balance of payments deficit of USD1.2 billion in June. The cumulative deficit for the January–June period amounted to USD3.3 billion, up from USD0.7 billion during the same period last year, on the back of an increasing merchandise trade deficit.

Fitch Ratings affirmed the Philippines’ long-term foreign currency issuer default investment-grade rating of BBB with a stable outlook, which is considered reflective of the economy’s strong growth and sound banking sector and economic policy framework.

Foreign net flows into the Republic of Korea’s local currency bond market remained high at KRW2.1 trillion in June, albeit lower than the KRW3.3 trillion recorded in May. For the first half of 2018, cumulative net bond inflows reached KRW12.0 trillion.

Last week, government bond yields climbed for all tenors in Indonesia and Viet Nam while they fell for in Hong Kong, China and the Republic of Korea. Yields for most tenors increased in Malaysia and Thailand but were down in the People’s Republic of China and Singapore. In the Philippines, yield movements were mixed. The spread between the 2- and 10-year maturities narrowed in Hong Kong, China; the Republic of Korea; Malaysia; Singapore; and Viet Nam while it widened in the rest of the region.

Key Developments in Asian Local Currency Markets

Issue: 16 July 2018

On 12 July, the Monetary Policy Board of the Bank of Korea decided to leave its base rate unchanged at 1.50%. The central bank noted the continued growth in the global economy and volatility in financial markets caused by trade protectionism and the strengthening United States dollar. On the domestic front, the economy continued to be supported by consumption and exports, while inflation remained subdued. The Bank of Korea also lowered its gross domestic product (GDP) growth forecasts for 2018 and 2019 to 2.9% year-on-year (y-o-y) and 2.8% y-o-y, respectively. The inflation forecast for 2018 was maintained at 1.6% y-o-y, while the 2019 forecast was lowered to 1.9% y-o-y. The Monetary Policy Committee of Bank Negara Malaysia maintained the overnight policy rate at 3.25% in its meeting last week. The decision came on the back of the domestic economy remaining on a steady growth path as well as lower projected inflation for 2018. Malaysia’s positive growth performance will continue to be supported by private consumption, with an additional push from the tax holiday. External demand is also supporting growth as the global economy sustains its momentum.

Singapore’s economy expanded 3.8% y-o-y in the second quarter (Q2) of 2018, based on advance GDP estimates, lower than the 4.3% y-o-y growth in the first quarter (Q1) of 2018. On a seasonally adjusted quarter-on-quarter basis, Singapore’s economy grew 1.0%.

Growth in Malaysia’s Index of Industrial Production slowed in May to 3.0% y-o-y from 4.6% y-o-y in April. The deceleration was due to lower output growth in the manufacturing and electricity sectors, and a decline in the mining sector. On a monthly seasonally adjusted basis, industrial production slowed 0.2% in May compared with growth of 1.5% in April.

The People’s Republic of China’s (PRC) consumer prices rose 1.9% y-o-y in June, up from a 1.8% y-o-y in the earlier month, on higher food prices. Producer price inflation in the PRC accelerated to 4.7% y-o-y in June from 4.1% y-o-y in May.

The PRC’s exports rose 11.3% y-o-y and imports grew 14.1% y-o-y in June, generating a monthly trade surplus of USD41.6 billion. In the Philippines, exports increased to USD5,762 million and imports reached USD9,462 million in May, resulting in a monthly trade deficit of USD3,701 million.

Japan’s current account surplus widened to JPY1.9 trillion in May from JPY1.8 trillion in April as the surpluses in the primary income account and services account offset the deficits in the goods account and secondary income account. In Q1 2018, Japan posted a current account surplus of JPY5.9 trillion.

The foreign exchange reserves of Singapore inched up to USD288.0 billion in June from USD287.9 billion in May. In Singapore dollar terms, the foreign exchange reserves stood at SGD393 billion in June, higher than SGD385 billion recorded in the earlier month.

Last week, bond yields climbed for most tenors in emerging East Asian markets except for Indonesia and Malaysia, where yields mostly fell. Bond yields were mixed in the PRC. The spread between the 2- and 10-year maturities narrowed for most markets in the region except for Indonesia and Singapore.

Key Developments in Asian Local Currency Markets

Issue: 09 July 2018

Consumer price inflation slipped in Indonesia to 3.1% year-on-year (y-o-y) in June from 3.2% y-o-y in May. On a month-on-month (m-o-m) basis, however, the inflation rate climbed to 0.6% from 0.2% in the same period, due to seasonal increase in demand for goods and services coinciding with the Eid‘l Fitr celebration. Consumer price inflation in the Republic of Korea was unchanged at 1.5% y-o-y in June from the previous month. The rise in prices of food and nonalcoholic beverages slowed to 1.8% y-o-y in June from 2.5% y-o-y in May. Prices of basic goods in the Philippines jumped by 5.2% y-o-y in June, higher than May’s 4.6% y-o-y inflation. In Thailand, consumer price inflation eased to 1.4% y-o-y in June from 1.5% y-o-y in May. On a m-o-m basis, deflation of 0.09% was recorded in June versus 0.6% in May. Higher energy costs in June were more than offset by a decline in food prices.

Malaysia’s exports grew 3.4% y-o-y in May, drastically slowing from 14.0% y-o-y in April. Imports also performed modestly in May compared with April, marginally increasing 0.1% y-o-y versus 9.2% y-o-y. Exports in May were valued at MYR82.1 billion and imports were valued at MYR74 billion, bringing the trade surplus to MYR8.1 billion. The May surplus was much lower than April’s surplus of MYR13.0 billion.

The Republic of Korea’s current account surplus widened to USD8.7 billion in May from USD1.8 billion in April. The goods account surplus increased to USD11.4 billion in May from USD10.4 billion in the previous month as exports rose at a faster pace than imports on a m-o-m basis.

Malaysia’s foreign reserves lowered to USD104.7 billion at the end of June from USD108.5 billion at the end of May. The foreign reserves of the Philippines fell to the lowest level since June 2012. Gross international reserve of USD77.7 billion were recorded in June, down from USD79.2 billion in May.

Singapore’s Purchasing Managers Index (PMI) declined to 52.5 in June from 52.7 in May. A PMI above 50 indicates manufacturing activity expansion, while a PMI reading below 50 signifies contraction. The slower expansion in June was due to slower growth in factory output, imports, and new orders.

Last week, the International Finance Corporation issued its first peso-denominated green bond known as a Mabuhay bond. The issuance was valued at approximately USD90 million with a 15-year maturity. The bond carries a coupon rate of 6.35% and is callable at a price of 102 after 7 years and is amortizing.

The new AsianBondsOnline website was launched last week. The new website features a more user-friendly look and new options. Please check it out at /new/.

Local currency bond yields fell for most tenors in most markets in emerging East Asia with the exception of Thailand and Viet Nam, where yields mostly rose. The 2-year versus 10-year yield spread fell I most markets except in the PRC; Hong Kong, China and the Republic of Korea.

Key Developments in Asian Local Currency Markets

Issue: 02 July 2018

Local currency government bond yields in emerging East Asia edged higher in most markets between 1 March and 31 May as global economic growth continued to strengthen and the United States Federal Reserve proceeded with monetary policy tightening, according to the latest issue of the Asia Bond Monitor. The report also noted that the region’s local currency bonds outstanding reached USD12.8 trillion at the end of March on growth of 1.1% quarter-on-quarter and 12.0% year-on-year (y-o-y). The latest issue of the Asia Bond Monitor includes a theme chapter on the role of greenness indicators in green bond market development. A copy of the full report is available at /documents/abm_jun_2018.pdf.

In a meeting held on 28–29 June, Bank Indonesia’s Board of Governors decided to raise the 7-day reverse repurchase rate by 50 basis points (bps) to 5.25%. Bank Indonesia raised its policy rate for a third time this year for a cumulative hike of 100 bps. According to Bank Indonesia, the latest rate hike was a preemptive frontloading move to maintain the competitiveness of its domestic financial markets as other central banks adjust their monetary policies.

The People’s Bank of China reduced the reserve requirement ratio of some banks by 50 bps, effective 5 July. To help boost smaller firms, it also announced a reduction in the re-lending rate for small- and micro-sized enterprises by 50 bps.

The gross domestic product of Viet Nam grew 6.8% y-o-y in the second quarter of 2018 compared with revised 7.5% y-o-y growth in the first quarter. On a year-to-date basis, Viet Nam’s economy expanded 7.1% y-o-y in the second quarter of 2018.

The index of all-industry production in the Republic of Korea increased 1.7% y-o-y in May, while Singapore’s manufacturing output expanded 11.1% y-o-y in May. Viet Nam’s industrial production expanded 12.3% y-o-y in June.

The prices of basic goods and services in Singapore increased 0.4% y-o-y in May, higher than the 0.1% y-o-y gain posted in April. Consumer price inflation in Viet Nam climbed to 4.7% y-o-y in June from 3.9% y-o-y in May.

Hong Kong, China’s exports rose 15.9% y-o-y in May, accelerating from 8.1% y-o-y in April. In Indonesia, export growth climbed to 12.5% y-o-y from revised growth of 9.6% y-o-y in April. Total export growth for Viet Nam slowed to 10.1% y-o-y in June from 11.3% y-o-y in May. In Thailand, merchandise exports rose 13.1% y-o-y in May after rising 14.6% y-o-y in April.

The Government of the Philippines logged a budget deficit of PHP32.9 billion in May, a reversal from the budget surplus of PHP46.3 billion recorded in April. From January to May, the budget deficit of the Philippines stood at USD139 billion.

Watch out for the launch of the new AsianBondsOnline website on 3 July. The revamped website will feature a user-friendly new look that has a more attractive and accessible layout, as well as useful new options such as interactive charts and customizable data selection.

Local currency government bond yields declined for most tenors for most of the economies except for Malaysia and Viet Nam where most tenors rose. Yields increased for all tenors in Indonesia while it decreased for all tenors in Hong Kong, China. Yield spreads between the 2-year and 10-year tenors narrowed for all economies except for Hong Kong, China.

Key Developments in Asian Local Currency Markets

Issue: 25 June 2018

On 20 June, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) raised key interest rates by 25 basis points. The overnight lending rate, overnight reverse repurchase rate, and overnight deposit rate now stand at 4.00%, 3.50%, and 3.00%, respectively. The rates were hiked to help mitigate the effects of inflation, which is expected to remain high. On 20 June, the Monetary Policy Committee of the Bank of Thailand decided to leave its policy rate unchanged at 1.50%. The committee noted that the Thai economy continues to strengthen, buoyed by domestic and external demand. Economic growth is expected to post stronger growth than previously estimated. The Bank of Thailand raised both its economic growth and inflation forecasts for 2018 and 2019.

Consumer prices in Hong Kong, China rose 2.1% year-on-year (y-o-y) in May, up from 1.9% y-o-y in April, due to increases in charges for package tours and private housing rentals. In Japan, consumer price inflation inched up to 0.7% y-o-y in May from 0.6% y-o-y in April. Food prices rose 0.8% y-o-y in May following a 0.7% y-o-y increase in April. Consumer price inflation in Malaysia climbed from 1.4% y-o-y in April to its fastest pace in 4 months at 1.8% y-o-y in May. Transportation prices increased the most at 3.8% y-o-y in May, up from 0.4% y-o-y in April, driving the uptick in inflation as most groups experienced moderating price increases.

Japan posted a trade deficit of JPY578 billion in May, higher than the JPY204 billion deficit posted in the same month in 2017, as imports rose at a faster pace than exports. Exports rose 8.1% y-o-y in May, while imports increased 14.0% y-o-y. Singapore’s non-oil domestic exports increased 15.5% y-o-y in May, a further expansion from the 11.8% y-o-y increase recorded in April. The growth of 26.2% y-o-y in exports of non-electronic products offset the decrease of 7.8% y-o-y in exports of electronic products.

The Philippines posted a larger balance of payments deficit of USD583 million in May compared with USD270 million in April. Foreign currency deposits and the central bank’s income from abroad were not enough to offset the foreign exchange operations and foreign-currency-denominated payments made by the central government, which were the main drivers of the outflows.

Foreign net inflows into the Republic of Korea’s local currency bond market surged to KRW3.2 trillion in May from KRW708 billion in April. By type of bond, net bond inflows amounted to KRW1.3 trillion for Korean Treasury Bonds and KRW2.0 trillion for Monetary Stabilization Bonds.

We are pleased to invite you to attend the release of the June issue of the Asia Bond Monitor, which will be launched at a conference coorganized by the Asian Development Bank and the Korea Institute of Finance on 29 June in Seoul. For further details, please see invitation (http://asianbondsonline.adb.org/events/2018/abm_jun_2018/abm-invitation.php)

Local currency government bond yields rose for all tenors in Hong Kong, China; and for most tenors in Indonesia, Malaysia, the Philippines, and Thailand. Yields fell for all tenors in the Republic of Korea and Viet Nam; and for most tenors in the PRC and Singapore. The yield spread between the 2-year and 10-year tenors widened for most markets in the region except in the PRC; Hong Kong, China; the Republic of Korea; and Singapore.

Key Developments in Asian Local Currency Markets

Issue: 18 June 2018

The United States Federal Reserve raised its key policy rate target range by 25 basis points to 1.75% to 2.00% at its 13–14 June policy meeting, noting the continued strengthening of the labor market as well continued growth in economic activity. The Federal Open Market Committee is expecting at least four rate hikes for 2018. Also, last week, the European Central Bank announced that it would end its net asset purchase program by the end of December. The current pace of EUR30 billion in net asset purchases per month will be continued until September after which the amount of monthly purchases would be reduced by half until December. The central bank said that while current economic indicators point toward weaker growth, growth remains solid as reasons for its decision. The Bank of Japan announced that it would continue its “qualitative and quantitative monetary easing with yield curve control” program, keeping a target of -0.1% for the short-term policy rate and around zero for the 10-year government bond yield. On 14 June, the Hong Kong Monetary Authority adjusted its base rate upward to 2.25% from 2.00% following the upward shift by 25 basis points in the target range for the United States federal funds rate.

Consumer prices in the People’s Republic of China (PRC) rose 1.8% year-on-year (y-o-y) in May, maintaining its pace in April. Prices grew fastest for healthcare, which rose 5.1% y-o-y, followed by residential housing prices, which rose 2.2% y-o-y. On a month-on-month basis, consumer prices fell 0.2%, led by a 0.8% drop in food prices.

Industrial Production in the PRC grew 6.8% y-o-y in May from a 7.0% y-o-y growth in April, largely driven by manufacturing, which rose 6.6% y-o-y in May after growing 7.4% y-o-y in April. Malaysia’s industrial production grew faster in April at 4.6% y-o-y, compared with 3.1% y-o-y in March, supported by higher output in all sectors. Industrial production in the manufacturing sector in Hong Kong, China rose 1.1% y-o-y in the first quarter of 2018, following 0.8% y-o-y growth in the previous quarter, buoyed by higher output over the period in all industries except metal, computer electronics, and optical products.

The Producer Price Index for manufacturing in Hong Kong, China rose 3.8% y-o-y in the first quarter of 2018 following a 3.5% y-o-y increase in the previous quarter as prices for all manufacturing industries except textiles and wearing apparel rose over the period.

Retail sales in the PRC rose 8.5% y-o-y in May, easing from the 9.4% y-o-y growth in April as both urban and rural areas posted slower growth over the period. Retail sales in Singapore expanded 0.4% y-o-y in April, recovering from a contraction of 1.1% y-o-y in March spurred mainly by higher petrol prices

On 12 June, RAM Ratings affirmed Thailand’s global scale rating of gBBB1(pi) and ASEAN scale rating of seaAA1(pi) on the basis of the market’s robust external finances, well-diversified economy, and fiscal position.

Last week, Thailand issued its first green bond by a financial institution via a 7-year bond worth USD60 million sold by TMB Bank to the International Financial Corporation, the proceeds of which will be used to fund climate related projects.

Local currency government bond yields rose for most tenors in Hong Kong, China; Malaysia; and Singapore; and for all tenors in the Philippines. Conversely, yields fell for most tenors in the Republic of Korea, Thailand, and Viet Nam while yield movements were mixed in the PRC. Yields were unchanged in Indonesia due the week-long Eid’l Fitr holiday. Between 2- and 10-year government bonds, yield spread widened for Malaysia, Singapore, Thailand, and Viet Nam; narrowed for the PRC; Hong Kong, China; the Republic of Korea; and the Philippines; and was unchanged for Indonesia.

Key Developments in Asian Local Currency Markets

Issue: 11 June 2018

Consumer price inflation in Indonesia eased to 3.2% year-on-year (y-o-y) in May from 3.4% y-o-y in April due to slower increases in food prices. Between April and May, the monthly inflation rate reached 0.2%. Bank Indonesia expects inflation to stay within the target range of 2.5%–4.5% for the year. In the Philippines, consumer price inflation rose to 4.6% y-o-y in May from 4.5% y-o-y in April. Inflation has gained speed since January, averaging 4.1% year-to-date, which is slightly above the 2.0%–4.0% target band set by the Bangko Sentral ng Pilipinas for full-year 2018. The increase in consumer prices was largely due to higher y-o-y increases for alcoholic beverages and tobacco (20.5%); furnishing, household equipment, and routine maintenance of the house (2.9%); transport (6.2%); and restaurant and miscellaneous goods and services (3.7%).

Japan’s economy contracted 0.2% quarteron-quarter in the first quarter (Q1) of 2018, based on the second preliminary estimate by the Cabinet Office, which was unchanged from the first preliminary estimate. Japan posted 0.3% quarter-on-quarter growth in the fourth quarter of 2017. On an annualized basis, Japan’s economy fell 0.6% in Q1 2018, following 1.0% growth in the previous quarter.

The manufacturing Purchasing Managers Index in Singapore slightly dropped in May to 52.7 from 52.9 logged in April. A reading above 50 indicates a generally expanding manufacturing economy.

Exports in the People’s Republic of China (PRC) rose 12.6% y-o-y in May and imports climbed 26.0% y-o-y. A trade surplus amounting to USD24.9 billion was recorded in May. Malaysia’s exports surged 14.0% y-o-y in April and imports grew 9.1% y-o-y. Malaysia posted a trade surplus of MYR13.1 billion in April. The Philippines posted a trade deficit of USD3.6 billion in April, widening from a USD2.5 billion trade deficit in March.

The Republic of Korea’s current account surplus narrowed to USD1.8 billion in April from USD5.2 billion in March. The lower surplus was largely driven by the larger deficit incurred in the primary income account of USD5.9 billion in April. In Japan, the current account surplus narrowed to JPY1.8 trillion in April from JPY3.1 trillion in March. The lower surplus in April was primarily driven by the services account deficit and the drop in the goods account surplus.

Hong Kong, China’s foreign currency reserve assets shrank to USD432 billion in May from USD435 billion in April. The May foreign currency reserve asset position was equivalent to more than seven times the currency in circulation, or about 45% of the Hong Kong dollar M3 money supply. Malaysia’s international reserves slipped to USD108.5 billion at the end of May from USD109.5 billion at the end of April. The reserves position is sufficient to finance 7.6 months of retained imports and is equivalent to 1.1 times the short-term external debt. In the Philippines, the gross international reserves slightly dropped to USD79.0 billion in May from USD79.6 billion in April. The gross international reserves position in May is deemed sufficient tocover 7.7 months’ worth of imported goods and payments of services and primary income.

Last week, local currency government bond yields rose for all tenors in Hong Kong, China; Indonesia and Singapore, and for most tenors in the PRC, Malaysia and the Philippines. On the other hand, yields mostly fell in the Republic of Korea and Thailand, while remaining mixed in Viet Nam. The spread between the 2- and 10-year yields widened for most markets except for the PRC, the Philippines, and Thailand.

Key Developments in Asian Local Currency Markets

Issue: 04 June 2018

Bank Indonesia raised its policy rate for a second time in 2 weeks in an off-schedule monetary policy meeting on 30 May. The 7-day reverse repurchase rate, deposit facility rate, and lending facility rate were raised by 25 basis points (bps) each to 4.75%, 4.00%, and 5.50%, respectively. The rate hike was viewed as a preemptive move by the central bank to stabilize the Indonesian rupiah as the United States Federal Reserve is expected to raise its policy rate in its June meeting.

The Republic of Korea’s real gross domestic product grew 2.8% year-on-year (y-o-y) in the first quarter of 2018, unchanged from the released advance estimates of the Bank of Korea. By type of expenditure, consumption led all growth. By sector, growth for all industries, excluding services, was revised downward.

Based on preliminary data, industrial production in Japan rose 0.3% month-on-month (m-o-m) in April, slower than the 1.4% m-o-m increase posted in March, supported by transport equipment; general-purpose, production, and business-oriented machinery; and fabricated models. The Index of AllIndustry Production in the Republic of Korea recovered in April, rising 2.0% y-o-y following a 1.0% y-o-y contraction in March due to positive annual growth in all industries excluding services. Viet Nam’s index of industrial production expanded 7.1% y-o-y in May, slowing from 9.4% y-o-y growth in April. Despite higher output from the electricity and water sectors, underperformance in the mining and quarrying, and manufacturing sectors partially offset the index.

The People’s Republic of China’s Purchasing Managers Index for manufacturing rose to 51.9 in May from 51.4 in April. Contributing to the increase was the rise in the subindexes for production and new orders, which rose to 54.1 and 53.8, respectively.

Viet Nam logged an inflation rate of 3.9% y-o-y in May, climbing from 2.8% y-o-y in April, on increases in prices of food and foodstuffs; garments, footwear, and hats; housing and construction materials; and transport. Consumer price inflation in Thailand rose to its fastest pace in 16 months in May at 1.5% y-o-y, up from 1.1% y-o-y in April, stemming largely from rising fuel prices. Consumer price inflation in the Republic of Korea eased to 1.5% y-o-y in May from 1.6% y-o-y in April, affected by slowly rising prices for food and nonalcoholic beverages; clothing and footwear; housing, water, electricity, gas, and other fuels; healthcare; and miscellaneous goods and services.

In Thailand, merchandise exports climbed 14.6% y-o-y in April after rising 6.3% y-o-y in March. In the same period, imports surged 22.7% y-o-y versus 6.7% y-o-y in the prior month. The trade surplus declined to USD0.2 billion in April from USD3.0 billion in March. Viet Nam’s total exports increased 7.1% y-o-y in May and total imports increased 6.7% y-o-y. Although imports grew slower than exports, Viet Nam registered a trade deficit of USD500 million.

Hong Kong, China registered a budget deficit of HKD5.1 billion in April. Expenditures for the first month of its financial year reached HKD38.4 billion, while revenues amounted to HKD33.3 billion.

Local currency government bond yields declined for most tenors for most of the economies except for the People’s Republic of China where most tenors rose. Yields increased for all tenors in Viet Nam while it decreased for all tenors in Indonesia. Yield spreads between the 2-year and 10-year tenors narrowed for all economies except for the People’s Republic of China and Hong Kong, China.

Key Developments in Asian Local Currency Markets

Issue: 28 May 2018

Singapore's economy grew 4.4% year-on-year (y-o-y) during the first quarter (Q1) of 2018, which was faster compared with the previous quarter's expansion of 3.6% y-o-y, driven by the manufacturing sector. The Ministry of Trade and Industry revised its gross domestic product growth forecast for 2018 to 2.5%–3.5% from the previously announced range of 1.5%–3.5%. In Thailand, gross domestic product growth accelerated to 4.8% y-o-y in Q1 2018 from 4.0% y-o-y in the previous quarter, stemming from positive growth in all major expenditure types. The Ministry of Finance revised its full-year 2018 growth projection to 4.5% from an earlier estimate of 4.2%.

Preliminary data showed that manufacturing output in Singapore rose to 9.1% y-o-y in April from 6.1% y-o-y in March as all clusters registered growth during the month.

The Monetary Policy Board of the Bank of Korea decided leave its base rate unchanged at 1.50% during its policy meeting on 24 May amid the solid expansion of the domestic economy, while inflation is expected to pick up in the second half of 2018.

In April, Hong Kong, China’s consumer price inflation slowed to 1.9% y-o-y. Prices were up for all components of the Consumer Price Index except durable goods, which continued to decline. Singapore’s consumer price inflation also slowed in April, easing to 0.1% y-o-y. The Monetary Authority of Singapore’s core inflation edged down to 1.3% y-o-y in April from 1.5% y-o-y in March. In Malaysia, consumer prices slightly picked up by 1.4% y-o-y in April. Notable change was seen in transport costs, which increased 0.4% y-o-y after a decline of 1.5% y-o-y in March. Malaysia’s core inflation slowed to 1.5% y-o-y in April from 1.7% y-o-y in March.

Japan posted a trade surplus of JPY626 billion in April, higher than the JPY478.3 billion surplus registered in the same period a year earlier, as exports rose 7.8% y-o-y versus a 5.9% y-o-y gain for imports.

The Monetary Board of the Bangko Sentral ng Pilipinas reduced the reserve requirement ratio for banks by 1 percentage point to 18.0%, following a 1 percentage point reduction in March. The reduction will be implemented starting 1 June 2018.

The Government of the Philippines registered a budget surplus of PHP46.3 billion in April, a reversal from the PHP110.7 billion budget deficit in March. Revenues surged to PHP307.6 billion while expenditures eased to PHP261.2 billion.

Last week, the Government of Indonesia priced JPY100 billion worth of samurai bonds in four tranches. The bond sale comprised JPY49 billion of 3-year bonds with a coupon rate of 0.67%, JPY39 billion of 5-year bonds with a coupon rate of 0.92%, JPY3.5 billion of 7-year bonds with a coupon rate of 1.07%, and JPY8.5 billion of 10-year bonds with a coupon rate of 1.27%..

Last week, yields for local currency government bonds were down for most tenors in the People’s Republic of China; Hong Kong, China; the Republic of Korea; and the Philippines, while yields were up for most tenors in Indonesia and Thailand. Yield movements were mixed in Malaysia and Singapore. In Viet Nam, yields were unchanged for all tenors except for 5-year maturity. The yield spread between 2-year and 10-year government bonds narrowed for all markets in the region except for Malaysia where it widened by 4.3 basis points and in Viet Nam where it was unchanged.

Key Developments in Asian Local Currency Markets

Issue: 21 May 2018

In a meeting held on 16–17 May, the Board of Governors of Bank Indonesia decided to raise by 25 basis points (bps) the 7-day reverse repurchase rate to 4.50%, the deposit facility rate to 3.75%, and the lending facility rate to 5.25%. The rate hike is part of policy measures undertaken by Bank Indonesia to maintain economic and financial stability on the back of rising risks and tightening liquidity in global financial markets. The Monetary Policy Committee of the Bank of Thailand decided to keep its policy rate steady at 1.50% in its meeting held on 16 May. In its assessment, the domestic economy continues to strengthen, buoyed by growth in the external sector and improvements in domestic demand.

Japan’s economy contracted 0.2% quarteron-quarter (q-o-q) in the first quarter (Q1) of 2018, following growth of 0.1% q-o-q in the previous quarter, based on preliminary estimates from the Cabinet Office. Private consumption was unchanged in Q1 2018 following 0.2% q-o-q growth in the previous quarter. Private residential investment and private nonresidential investment fell 2.1% q-o-q and 0.1% q-o-q, respectively, in Q1 2018. Malaysia’s economy expanded 5.4% y-o-y in Q1 2018, underpinned by strong private sector expenditure and a buoyant external sector. Private consumption and investment grew 6.9% y-o-y and 0.5% y-o-y in Q1 2018, respectively, and exports grew 3.7% y-o-y. The public sector underperformed, with consumption increasing marginally by 0.4% y-o-y while investments declined 1.0% y-o-y.

Consumer price inflation in Japan eased to 0.6% y-o-y in April from 1.1% y-o-y in March, driven by slower annual increases in five out of ten commodity groups and the continued contraction in two groups. On a month-onmonth basis, consumer prices in Japan fell 0.4%.

Indonesia posted a trade deficit in April of USD1.6 billion, a reversal from the trade surplus of USD1.1 billion recorded a month earlier. The Central Statistics Agency noted an unusual increase in imports, which climbed 34.7% y-o-y in April to USD16.1 billion. Singapore’s non-oil domestic exports improved 11.8% y-o-y in April, a reversal of the decline of 3.2% y-o-y in March. The growth was mainly due to non-electronic exports, which grew by 19.6% y-o-y, a better performance from March’s decline of 1.7% y-o-y.

Malaysia’s current account surplus grew to MYR15.0 billion in Q1 2018 from MYR14.0 billion in the previous quarter, owing to a higher goods account surplus (MYR35.7 billion from MYR34.1 billion) and a lower services account deficit (MYR5.8 billion from MYR7.0 billion). The Philippines’ overall balance of payments position posted a deficit of USD270 million in April 2018, a reversal of the surplus of USD917 million in April 2017.

The People’s Republic of China’s industrial production rose 7.0% yo-y in April after rising 6.0% y-o-y March. All three major industrial categories showed improvement; however, mining output growthremained negative.

Yields rose fell for most tenors in the Republic of Korea, largely on the back of improving investor sentiment. Yields on the other hand, rose for all tenors in the Philippines following a prior policy rate hike while yields rose for most tenors in the remaining markets, largely tracking US yields. The 2-year versus 10-year yield spread rose in all markets except Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 14 May 2018

In its 10 May Monetary Board policy meeting, the Bangko Sentral ng Pilipinas raised the interest rate on its overnight reverse repurchase, lending, and deposit facilities by 25 basis points each. The central bank stated that high inflation and elevated risks prompted the board to act to mitigate potential second-round effects. Bank Negara Malaysia maintained its overnight policy rate at 3.25% during its monetary policy meeting on 10 May.

Hong Kong, China’s gross domestic product (GDP) growth accelerated to 4.7% year-on-year (y-o-y) in the first quarter (Q1) of 2018 from 3.4% y-o-y in the previous quarter as all expenditure components expanded over the period, led by higher growth in private consumption. The robust export growth in both goods and services also contributed to the strong performance of the economy during the quarter. Indonesia’s GDP growth slowed in Q1 2018, rising 5.1% y-o-y after expanding 5.2% y-o-y in the fourth quarter (Q4) of 2017. Domestic consumption remained subdued, expanding less than 5.0% in Q1 2018. Also contributing to slower GDP growth were the weaker increase in government expenditures and a worsening trade performance. The economy of the Philippines expanded more rapidly in Q1 2018, with growth rising to 6.8% y-o-y from 6.5% y-o-y in Q4 2017. By sector, the industry sector grew the fastest in Q1 2018 at 7.9% y-o-y, compared with a 7.0% y-o-y expansion in Q4 2017.

The People’s Republic of China’s (PRC) consumer prices rose 1.8% y-o-y in April after climbing 2.1% y-o-y in March. The decline in consumer price inflation was largely due to weaker food price increases. On the other hand, producer price inflation accelerated, with producer prices rising 3.4% y-o-y in April after a 3.1% y-o-y increase in March.

The PRC reported an April trade surplus of USD28.8 billion, reversing March’s USD5.0 billion deficit. The gains in the PRC’s trade surplus in April were largely due to the month-on-month export growth of 15.3% to USD200.4 billion and the import decline of 4.1% month-on-month to USD171.7 billion. In the Philippines, total exports declined 8.2% y-o-y to USD5.5 billion in March, while total imports increased 0.1% y-o-y to USD8.1 billion. The Philippines posted a trade deficit of USD2.6 billion in March 2018.

Japan’s current account surplus widened to JPY3.1 trillion in March from JPY2.1 trillion in February. The higher surplus was driven by the jump in the goods account surplus to JPY1.2 trillion from JPY0.2 trillion in February, driven by the surge in exports relative to the marginal growth in imports. For fiscal year 2017, Japan posted a current account surplus of JPY21.8 trillion.

Malaysia’s Index of Industrial Production inched up to 3.1% y-o-y in March from 3.0% y-o-y in February, supported by the manufacturing and electricity sectors. The manufacturing sector and electricity outpot grew 4.1% y-o-y and 4.4% y-o-y, respectively.

Local currency government bond yields rose for most tenors in Indonesia, the Republic of Korea, Malaysia, Singapore, and Thailand. Yields fell for most tenors in the People’s Republic of China; Hong Kong, China; and Viet Nam. Meanwhile, yield movements were mixed in the Philippines. Yield spreads between the 2-year and 10-year tenors narrowed for all markets in the region except in the PRC, the Philippines, Thailand, and Viet Nam.

Key Developments in Asian Local Currency Markets

Issue: 07 May 2018

The Index of All-Industry Production in the Republic of Korea fell 1.0% year-on-year (y-o-y) in March, following a 1.2% y-o-y contraction in February, led by the 6.3% y-o-y decline in construction versus the 1.2% y-o-y decrease in the previous month. In April, Singapore’s Purchasing Managers Index fell slightly to 52.9 from 53.0 in March. The index remained above 50.0, which is indicative of an expanding manufacturing industry, with the electronics sector still the main driver of manufacturing. Industrial production in Viet Nam grew 9.4% y-o-y in April after rising 8.7% y-o-y in March, largely driven by gains in manufacturing and the production of electricity.

In April, consumer price inflation in the Republic of Korea rose to 1.6% y-o-y from 1.3% y-o-y in March, primarily driven by price inflation for food and nonalcoholic beverages accelerating to 2.9% y-o-y in April from 1.5% y-o-y in the previous month. Consumer price inflation in Viet Nam rose to 2.8% y-o-y in April from 2.7% y-o-y in March due to increases in transport prices and housing and construction materials. Consumer price inflation in the Philippines increased to 4.5% y-o-y in April from 4.3% y-o-y in March with alcoholic beverages and tobacco recording the highest growth at 20.0% y-o-y. Consumer price inflation in Thailand rose to 1.1% y-o-y in April from 0.8% y-o-y mainly due to tobacco and alcoholic beverages which rose to 6.0% y-o-y, maintaining its previous month rate. Consumer price inflation in Indonesia was practically unchanged in April at 3.41% y-o-y from the previous month’s 3.40% y-o-y as larger price increases in food, processed food, healthcare, and education were offset by smaller price adjustments in housing, clothing, and transport.

The Republic of Korea’s exports fell 1.5% y-o-y to USD50.1 billion in April while imports rose 14.5% y-o-y to USD43.5 billion, resulting in the trade surplus narrowing to USD6.6 billion from USD6.8 billion in March. Malaysia’s exports rose 2.2% y-o-y to MYR84.5 billion in March while imports fell 9.6% y-o-y to MYR69.8 billion, bringing the trade surplus to MYR14.7 billion, higher than in February and more than double compared to a year earlier. Thailand’s exports rose 6.3% y-o-y to USD22,057 million in March, while imports rose 6.7% y-o-y to USD19,042 million, leading to a trade surplus of USD3,015 million, an expansion from USD2,289 in February. Viet Nam’s exports declined 13.9% month-on-month (m-o-m), reaching USD18,200 million in April, much faster than imports which rose 7.3% m-o-m to USD17,500 million, and shrinking the trade surplus to USD700 million in April from USD2,258 million in March.

Last week, local currency government bond yields rose for most tenors in the region except in the Republic of China, Malaysia and Viet Nam where yields fell for most tenors. Mixed yield movements were seen in Singapore. Meanwhile, yield spreads between 2-year and 10-year tenors narrowed in most markets in the region but widened in Singapore and Viet Nam.

Key Developments in Asia Local Currency Markets

Issue: 30 April 2018

The Republic of Korea’s real gross domestic product grew 2.8% year-on-year (y-o-y) in the first quarter of 2018, according to advanced estimates by the Bank of Korea, the same rate posted in the fourth quarter of 2017. By type of expenditure, gross fixed capital formation led the growth, gaining 4.7% y-o-y.

Hong Kong’s consumer prices rose 2.6% y-o-y in March, slower than the 3.1% y-o-y increase in February, but marginally faster than the average inflation rate of 2.3% y-o-y for January-February, which balances the distortion effect caused by the timing of the Lunar New Year. Singapore’s consumer price inflation slowed to 0.2% y-o-y in March from 0.5% y-o-y in February. Core inflation eased as well to 1.5% y-o-y in March from 1.7% y-o-y in the previous month, but is expected to gradually rise over the year.

At its monetary policy meeting, the Bank of Japan announced that it would continue its “qualitative and quantitative monetary easing with yield curve control” program. The central bank stated that the economy is expected to grow above its potential for fiscal year 2018, supported by accommodative financial conditions, government spending, and growth in overseas economies.

Industrial production in Japan rose 1.2% month-on-month in March following a 2.0% month-on-month increase posted in February, based on preliminary data from the Ministry of Economy, Trade and Industry. Manufacturing output in Singapore increased 5.9% y-o-y.

Hong Kong, China’s merchandise exports rose 8.0% y-o-y in March to reach HKD347.7 billion, accelerating from the 1.7% y-o-y recorded growth in February. Y-o-y increases were recorded in exports of most machinery-related commodities led by power generating machinery and equipment, while y-o-y declines were recorded in exports of most non-machinery commodities led by nonmetallic mineral manufactures.

Hong Kong, China’s trade deficit widened to HKD55.5 billion in March from HKD42.3 billion over the same period a year earlier, and from HKD42.7 billion in February, as imports grew 10.7% y-o-y in March, a reversal from the 3.2% y-o-y decline recorded in February, and exports grew 8.0% y-o-y in March.

In March, the Government of the Philippines collected revenues of PHP202 billion while spending PHP313 billion. Both revenues and expenditures were higher compared to February’s PHP179 billion and PHP240 billion, respectively. For the second straight month, disbursements outpaced revenues, resulting in a budget deficit of PHP111 billion in February.

Standard and Poor’s Global Ratings maintained the Philippines’ sovereign credit rating at BBB, while raising its outlook from stable to positive. Standard and Poor’s view is that improvements in policy making could support more sustainable public finances and balanced growth over the next 24 months.

Local currency government bond yields rose for all tenors in Hong Kong, China; Indonesia; Malaysia; Singapore; and Viet Nam; while most yields rose for the People’s Republic of China, the Republic of Korea, Thailand and the Philippines. Yield spreads between the 2-year and 10-year tenors decreased for all except for the People’s Republic of China; Hong Kong, China; Republic of Korea; and Singapore.

Key Developments in Asia Local Currency Markets

Issue: 23 April 2018

The People’s Republic of China’s (PRC) gross domestic product expanded 6.8% year-on-year (y-o-y) in the first quarter of 2018, the same rate of growth as in the fourth quarter of 2017. Growth was driven primarily by the tertiary and secondary industries. The PRC’s industrial production slowed to 6.8% y-o-y in the first 3 months of 2018, after rising 7.2% y-o-y in the previous 2 months.

Bank Indonesia maintained its 7-day reverse repo rate at 4.25% during its monetary policy meeting on 18–19 April. Bank Indonesia considers the decision to be consistent with its efforts to maintain macroeconomic and financial system stability as external pressures begin to build.

Consumer price inflation in Japan eased to 1.1% y-o-y in March from 1.5% y-o-y in February as seven out of ten commodity groups posted lower annual price increases and two groups continued to record price contractions. In Malaysia, consumer price inflation marginally eased to 1.3% y-o-y in March from 1.4% y-o-y in February, with prices of most commodity groups unchanged. The inflation rate logged in March was the lowest since August 2016.

Indonesia’s export and import growth slowed in March, rising 6.1% y-o-y and 9.1% yo-y, respectively, from 12.0% y-o-y and 24.9% y-o-y in February. Exports amounted to USD15.6 billion and imports amounted to USD14.5 billion, resulting in a USD1.1 billion trade surplus in March after posting deficits for the past 3 consecutive months. Japan registered a trade surplus of JPY797.3 billion in March as exports rose 2.1% y-o-y to JPY7.4 trillion while imports decreased 0.6% y-o-y to JPY6.6 trillion. Singapore’s non-oil domestic exports decreased at a slower pace of 2.7% yo-y in March compared with a 6.0% y-o-y contraction in February.

The overall balance of payments of the Philippines posted a deficit of USD266 million in March, slightly lower than February’s deficit of USD429 million.

Foreign net inflows into the Republic of Korea’s local currency bond market slightly eased to KRW1.0 trillion in March from KRW2.6 trillion in February.

Investments in fixed assets in the PRC slowed in the first 3 months of the year, with investments rising 7.5% y-o-y in period January–March, down from 7.9% in January–February. Total investments for the quarter reached CNY10.1 trillion.

The People’s Bank of China (PBOC) reduced the reserve requirement ratio of banks by 100 basis points, effective 25 April. The PBOC placed additional restrictions on bank funds freed by the reduction, stipulating that the released funds must be used to repay bank borrowings availed from the PBOC’s Medium-Term Lending Facility. Leftover funds must be used for lending to small and micro enterprises.

Local currency government bond yields rose for all tenors in Hong Kong, China; the Republic of Korea; Malaysia; Thailand; and Viet Nam, while it rose for most tenors in Indonesia, the Philippines and Singapore. On the other hand, yields fell for most tenors in the PRC. Yield spreads between the 2-year and 10-year tenors were mixed in the region with increases seen in the PRC, Indonesia, the Republic of Korea, the Philippines, and Singapore; and decreases in Hong Kong, China; Malaysia; Thailand; Viet Nam.

Key Developments in Asia Local Currency Markets

Issue: 16 April 2018

The Bank of Korea left its key policy rate, the base rate, unchanged at 1.5% at its monetary policy meeting held on 12 April. The Bank of Korea said that its decision to maintain the current accommodative stance is based on its assessment that domestic inflation remains low and that the domestic economy is expected to remain strong. The Monetary Authority of Singapore decided to increase slightly from zero the slope of the policy band of the Singapore dollar nominal effective exchange rate on 13 April. The width of the band and the level at which it is centered remained unchanged. Based on the forecast of the Monetary Authority of Singapore, the domestic economy is expected to continue to expand in 2018. Core inflation is also expected to rise steadily into 2019.

Consumer prices in the People’s Republic of China (PRC) rose 2.1% year-on-year (y-o-y) in March after rising 2.9% y-o-y in February. The decline in the PRC’s consumer price inflation rate was largely due to seasonal effects stemming from the Lunar New Year, which fell in February this year. In addition, the PRC’s producer price increases also softened, with prices rising 3.1% y-o-y in March after an increase of 3.7% y-o-y in February.

Singapore’s gross domestic product (GDP) in the first quarter of 2018 expanded 4.3% y-oy, an increase from 3.6% y-o-y growth during the fourth quarter of 2017. Malaysia’s industrial production growth slowed to 3.0% y-o-y in February from 5.4% y-o-y in the previous month.

The PRC’s exports fell 2.7% y-o-y in March after rising 44.5% y-o-y in February. Imports, on the other hand, rose 14.4% y-o-y in March after gaining 6.3% y-o-y in the previous month. The decline in exports caused the PRC to report a trade deficit of USD5.0 billion in March, a reversal from the prior month’s USD33.7 billion surplus. Philippine goods exports in February totaled USD12.4 billion, posting growth of 10.0% y-o-y. However, the Philippines recorded a trade deficit of USD3.06 billion in February, slightly lower compared to the USD3.16 billion deficit in January.

Hong Kong’s foreign reserves amounted to USD440 billion in March, declining marginally from USD443 billion in February and accounting for about 47% of the Hong Kong dollar’s M3 money supply. The total official foreign reserves of Singapore increased in March to USD287.0 billion from USD282.8 billion in February, a gain of 4.2%.

From a budget surplus in January, the Philippines experienced a budget deficit of PHP61.7 billion in February. Revenues stood at PHP178.5 billion versus PHP238.9 billion in January. On the other hand, expenditures increased from PHP228.7 billion in January to PHP240.3 billion in February, a 37.0% increase.

Standard and Poor’s maintained Japan’s long-term foreign and local currency credit rating at A+ and its short-term credit rating at A-1, and raised the outlook from stable to positive.

Local currency government bond yields fell for most tenors in The People’s Republic of China; Hong Kong, China; the Republic of Korea; Singapore; and Viet Nam. Yields rose for most tenors in Indonesia, Malaysia, the Philippines, and Thailand. Yield spreads between the 2- year and 10-year tenors increased except for Hong Kong, China; Indonesia; Singapore; and Thailand.

Key Developments in Asia Local Currency Markets

Issue: 09 April 2018

Consumer price inflation in Indonesia rose to 3.4% year-on-year (y-o-y) in March from 3.2% y-o-y in February. The increase was largely driven by the accelerated rise in prices of food items of 4.2% y-o-y versus 3.4% y-o-y in the previous month. In the Philippines, inflation increased to 4.3% y-o-y in March from 3.8% y-o-y in February. Among all commodity divisions, alcoholic beverages and tobacco registered the largest increase of 18.6% y-o-y, with food and nonalcoholic beverages posting the second-highest gain at 5.9% y-o-y. Inflation in Thailand rose to 0.8% y-o-y in March from 0.4% y-o-y in the previous month. Consumer price inflation in the Republic of Korea eased slightly to 1.3% y-o-y in March from 1.4% y-o-y in February. The slower inflation was driven by the deceleration in the rise of food and nonalcoholic beverage prices to 1.5% y-o-y in March from 2.2% y-o-y in February.

Malaysia’s exports and imports slightly decreased in February by 2.0% y-o-y to MYR70.3 billion and 2.8% y-o-y to MYR61.3 billion, respectively, following unineterrupted monthly increases since November 2016. Malaysia registered a trade surplus of MYR9.0 billion in February, down from MYR9.7 billion in the previous month.

The Republic of Korea’s current account surplus widened to USD4.0 billion in February from USD2.7 billion in January. The goods account posted a surplus of USD6.0 billion in February, lower than the USD8.1 billion surplus registered in January, as exports declined faster than imports on a monthly basis. During the same period, the deficits in the services account and the secondary income account declined, while the primary income account surplus rose.

The Purchasing Managers Index (PMI) of Singapore increased to 53.0 in March from 52.7 in February. The manufacturing industry has expanded for 19th consecutive months. The main drivers of the expansion in March were new orders, new exports, output, and imports.

Hong Kong, China’s retail sales rose 29.8% y-o-y in February, accelerating from a 4.2% yo-y increase in January, as all retail outlet groups exhibited double-digit growth, led by clothing footwear and allied products, which grew 42.2% y-o-y. The value of retail sales reached USD45.2 billion in February from USD44.9 billion in January.

The Republic of Korea’s official foreign reserves rose to USD396.8 billion in March from USD394.8 billion in February. The higher reserves were solely driven by the rise in deposits, as the value of securities held by the Republic of Korea declined in March. In Malaysia, gross international reserves rose to USD107.8 billion at the end of March from USD103.7 billion in the previous month. In the Philippines, gross international reserves decreased to USD80.1 billion in March from USD80.4 billion in February. The main driver of the decline was the outflow from foreign exchange activities, which dipped 12.8% month-on-month from USD6.3 billion in February to USD5.5 billion in March.

Local currency government bond yields fell for most tenors in the People’s Republic of China; Hong Kong, China; Indonesia; the Republic of Korea; and the Philippines. Yields rose for most tenors in Malaysia, Singapore, and Viet Nam. Meanwhile, yield movements were mixed in Thailand. Yield spreads between the 2-year and 10- year tenors narrowed for all markets in the region except in the Republic of Korea, Singapore and Viet Nam.

Key Developments in Asia Local Currency Markets

Issue: 02 April 2018

Viet Nam’s gross domestic product (GDP) grew 7.4% year-on-year (y-o-y) in the first quarter of 2018 versus full-year GDP growth of 6.8% in 2017, largely driven by gains in processing and manufacturing, and in agriculture, seafood, and forestry. The Republic of Korea’s GDP growth in the fourth quarter of 2017 was revised downward to 2.8% y-o-y from an advance estimate of 3.0% y-o-y. This was also slower than the 3.8% y-o-y growth posted in the third quarter of 2017. The Republic of Korea posted 3.1% annual growth in full-year 2017.

Industrial production in Japan rose 4.1% month-on-month (m-o-m) in February, a reversal from the 6.8% m-o-m contraction posted in January. The Index of All-Industry Production in the Republic of Korea fell 0.8% y-o-y in February, following a 4.4% y-o-y increase in January, led by a contraction in industrial production as manufacturing decreased 7.2% y-o-y. Singapore’s manufacturing output increased 8.9% y-o-y in February, slower than the 16.9% y-o-y growth posted in January, led by the electronics cluster, which grew 17.4% y-o-y.

The Bank of Thailand decided to keep its policy rate unchanged at 1.50% amid stronger economic growth, driven by continued expansion in merchandise exports and tourism, a gradual improvement in domestic demand, and inflation projected to rise at a slower pace than previously assessed.

Consumer price inflation in Viet Nam slowed to 2.7% y-o-y in March from 3.2% y-o-y in February due to a slower price increase in housing and construction materials, which rose 3.0% y-o-y in March versus 3.8% y-o-y in February.

Hong Kong, China registered a trade deficit of HKD42.7 billion in February as exports grew 1.7% y-o-y to reach HKD245.7 billion and imports fell 3.2% y-o-y to HKD288.5 billion. Combining January and February to offset the distortion effect caused by the timing of the Lunar New Year, exports expanded 10.7% y-o-y and imports expanded 10.5% y-o-y, leading to a trade deficit of HKD74.4 billion in January–February. Thailand, on the other hand, registered a trade surplus of USD2.3 billion in February as exports expanded 7.7% y-o-y, reaching USD19.8 billion, while imports expanded 21.8% y-o-y to USD17.5 billion. Viet Nam posted a trade surplus of USD1.3 billion in the first quarter of 2018 as exports grew 22.0% y-o-y to USD54.3 billion and imports grew 13.6% y-o-y to USD53.0 billion.

Thailand’s current account registered a surplus of USD6.2 billion in February with trade registering a surplus of USD2.3 billion while the surplus in net services, primary income, and secondary income reached USD3.9 billion.

Thailand’s current account registered a surplus of USD6.2 billion in February with trade registering a surplus of USD2.3 billion while the surplus in net services, primary income, and secondary income reached USD3.9 billion.

Key Developments in Asia Local Currency Markets

Issue: 26 March 2018

The United States (US) Federal Reserve raised the target Federal Funds rate by 25 basis points to range of 1.50%–1.75% in its meeting on 21 March. In its decision, the Federal Reserve cited continued economic growth and an improving labor market as reasons for its decision. In addition, the Federal Reserve upgraded its forecast for US economic growth for 2018 from 2.5% year-on-year (y-o-y) to 2.7% y-o-y and its forecast for 2019 from 2.1% y-o-y to 2.4% y-o-y.

Bank Indonesia maintained the 7-day reverse repo rate at 4.25% during its monetary policy meeting on 21–22 March as it considered its policy stance to be supportive of the domestic economic recovery. The central bank stated it would remain vigilant amid escalating risk factors such as the hawkish stance of the US Federal Reserve and the inward-oriented trade policies of some countries. The Monetary Board of the Bangko Sentral ng Pilipinas left the overnight reverse repurchase rate, its key policy rate, unchanged at 3.00% on 22 March. The central bank said that, while forecasts point to a rising trend, inflation for 2018 would remain within target.

Consumer prices in Hong Kong, China rose 3.1% y-o-y in February, accelerating from 1.7% y-o-y in January, as prices of all major commodities increased except for durable goods. Consumer prices in Japan grew slightly faster in February at 1.5% y-o-y compared to 1.4% y-o-y in January, but remained below the 2.0% inflation target set by the Bank of Japan. Singapore’s consumer price inflation rose to 0.5% y-o-y in February after recording zero growth in January, while the Monetary Authority of Singapore’s core inflation measure accelerated to 1.7% y-o-y from 1.4% y-o-y. Consumer price inflation in Malaysia slowed to a 16-month low of 1.4% y-o-y in February from 2.7% y-o-y in January as price adjustments slowed for most major commodity groups.

Japan registered a trade surplus of JPY3.4 billion in February. Exports rose 1.8% y-o-y to JPY6.5 trillion in February, while imports rose at a faster pace of 16.5% y-o-y to JPY6.5 trillion.

Hong Kong, China’s current account surplus narrowed to HKD15.2 billion in the fourth quarter of 2017 from HKD58.7 billion in the previous quarter, primarily due to a registered deficit of HKD46.1 billion in goods.

Last week, the Philippines issued its first Panda bonds—renminbi bonds issued by a foreign issuer in the People’s Republic of China’s bond market. The 3-year bonds were issued at a coupon rate of 5.00% with an issue size of CNY1.46 billion and were met with strong demand from investors.

Local currency government bond yields were up for most tenors in the People’s Republic of China; the Republic of Korea; the Philippines; and Thailand last week, while yields were down for most tenors in Hong Kong, China; Indonesia; and Malaysia. Yield movements were mixed in Singapore and Viet Nam. The 2-year versus 10-year yield spreads were also mixed: the spreads widened in Indonesia; the Philippines; Thailand; and Viet Nam, while it narrowed in the People’s Republic of China; Hong Kong, China; the Republic of Korea; and Singapore. In Malaysia, the spread was unchanged from last week.

Key Developments in Asia Local Currency Markets

Issue: 19 March 2018

According to the latest edition of the Asia Bond Monitor, 10-year local currency government bond yields rose in emerging East Asian markets between the end of December 2017 and mid-February due to interest rate hikes in the United States and strong global growth. Emerging East Asia’s local currency bond market expanded 3.1% quarter-on-quarter and 12.1% year-on-year (y-o-y) in the fourth quarter (Q4) of 2016, reaching USD10.2 trillion at the end of December. A copy of the full report is available at http://asianbondsonline.adb.org/documents/abm_mar_2018.pdf.

The People’s Republic of China’s (PRC) industrial production grew 7.2% y-o-y in January–February, up from 6.2% y-o-y in December and 6.3% y-o-y in January–February 2017. Meanwhile, fixed asset investment in the PRC grew 7.9% y-o-y in January–February after rising 7.2% y-o-y in December.

Hong Kong, China’s industrial production index for manufacturing rose 0.6% y-o-y in Q4 2017, following a 0.3% y-o-y rise in the previous quarter, mainly driven by an increase of output in the food, beverages, and tobacco sector. All other manufacturing industries recorded decreases in output over the same perio