Vietnam’s local currency bond market posted a healthy 9.5 percent quarter-on-quarter growth in the first quarter of 2020 to reach 57.6 billion USD at the end of March. — (Photo baodauthau.vn) Hanoi (VNS/VNA) – The COVID-19pandemic continues to drag on local currency bond markets in emerging EastAsia, including Vietnam, as investment sentiment globally and in the regionwane and containment measures limit economic activity.
According to the latest issueof the Asian Development Bank’s (ADB) Asia Bond Monitor, Vietnam’s localcurrency bond market posted a healthy 9.5 percent quarter-on-quarter growth inthe first quarter of 2020 to reach 57.6 billion USD at the end of March.
This is mainly due to a stronggrowth rate of the Government bond segment with growth rate of 10.5 percent to 53.3billion USD, accounting for 92.6 percent of the country’s total bond stock.
Corporate bonds, however,contracted 1.7 percent, marking 4.2 billion USD at the end of March given theabsence of new issuance over the review period.
Vietnam is among entering EastAsia countries and territories comprised of mainland China and Hong Kong,Indonesia, the Republic of Korea, Malaysia, the Philippines, Singapore andThailand.
ADB Chief Economist YasuyukiSawada said governments and central banks in the region have taken significantmeasures to mitigate the impact of COVID-19 through fiscal stimulus packagesand eased monetary policies. But more needs to be done to strengthen the region’seconomies and financial markets.
“While overall investmentsentiment is still down, there are signs of recovery in some economies asquarantine measures are strategically relaxed,” Sawada said.
Government bond yields trendeddownwards in most regional markets between 28 February and 29 May this year,while equity markets in emerging East Asia suffered losses and local currenciesdepreciated against the US dollar.
Credit spreads have widened fornearly all markets in the region as investors took a risk-averse approach, withthe share of foreign holdings in most of emerging East Asia’s local currencybond markets also declining.
Risks to the global outlookremain heavily tilted to the downside, mainly due to the uncertainty broughtabout by the COVID-19 pandemic, including the prospect of longer periods ofminimal economic activity and further waves of outbreaks. Other risk factorsinclude trade tensions between China and the US, as well as financialvolatility due to capital outflows from emerging markets.
Local currency bondsoutstanding in emerging East Asia totalled 16.3 trillion USD at the end ofMarch, up 4.2 percent from December 2019 and 14 percent higher than in March2019. Bond issuance in the region reached 1.7 trillion USD in the first quarterof 2020, up 19.7 percent from the fourth quarter of 2019.
Emerging East Asia’s localcurrency bonds outstanding as a share of gross domestic product rose to 87.8 percentat the end of March.
Government bonds outstandingrose to 9.9 trillion USD at the end of March, while corporate bonds reached 6.4trillion USD. China remains the largest bond market in emerging East Asia,accounting for 76.6 percent of the total bond stock at the end of the firstquarter of 2020.
The second issue of Asia BondMonitor this year includes five discussion boxes focused on the COVID-19pandemic. They explore its impact on capital markets; the possibility ofissuing pandemic bonds as an option to fight COVID-19; the rising attentiondirected to social bonds in response to the pandemic; using fintech to promoteinclusive growth and pandemic resilience; and the infrastructure and policiesneeded for firms to obtain financing during the COVID-19 pandemic.
The report also includes atheme chapter on the link between financial architecture and innovation. Ithighlights the importance of a sound and efficient financial system infostering a viable innovation environment./.
VNA
