Vietnam’s bond market was boosted mainly by the Government bond market. (Photo: infonet.vn) Hanoi (VNS/VNA) - Vietnamremained the smallest local currency bond market among nine economies ofemerging East Asia, according to the latest edition of the Asian DevelopmentBank’s (ADB) Asia Bond Monitor.
The report, which was released onNovember 20, revealed that Vietnam’s bond market registered growth of 5 percenta quarter and 15.7 percent a year to reach a size of 53 billion USD as of theend of September, a reversal from the quarterly contraction of 1.4 percent inthe second quarter.
In comparison, China’s bondmarket has an outstanding size of 9.2 trillion USD, comprising 72 percentof the regional total at the end of September. It was followed by the Republicof Korea with a bond market size of 2 trillion USD, Thailand at 337 billionUSD, Malaysia at 330 billion USD, Singapore at 291 billion USD, Hong Kong at 250billion USD, Indonesia at 185 billion USD and the Philippines at 107 billionUSD.
Vietnam’s bond market was boostedmainly by the Government bond market which posted a 5.2 percent on-quarter and14.7 percent yearly expansion to 49 billion USD.
The report pointed out that Vietnam’scorporate bond market remained small and underdeveloped but continued toexpand, posting growth of 2.9 percent quarter-on-quarter in the third quarterof this year.
Vietnam’s third quarter bondyields retreated in line with lower interbank rates and improved liquidityamong banks in September. The State Bank of Vietnam was expected to keepinterest rates steady for the rest of the year to support economic growth anduse other monetary tools to curb inflation, according to the report.
The report also pointed out thatunlike other emerging East Asia bond markets, Vietnam’s debt market was notsensitive to the US monetary policy tightening as bonds were largely held bydomestic investors, particularly commercial banks. However, it had beenindirectly affected by the US dollar strengthening vis-à-vis most regionalcurrencies.
Market participants in the AsianBonds Online 2018 Liquidity Survey noted that market conditions were moreaffected by trade tensions between the US and China, partly because these twomarkets are among their largest trading partners.
The report forecast thatshort-term risks would continue to cast a shadow over emerging East Asia’slocal currency bond markets. However, they should be able to weather thechallenges so long as the region’s policymakers remain vigilant.
“Concerns about emerging marketsare looming, but ultimately Asia’s strong fundamentals should attract investorsback to the region’s local currency bond markets,” said ADB Chief EconomistYasuyuki Sawada. “That said, the region’s policymakers must closely monitordevelopments and keep up their guard against potential shocks.”
Short-term risks included generalrisk aversion toward emerging markets, faster-than-expected hikes in USinterest rates, and escalating global trade tensions. Depreciation of regionalcurrencies and capital outflows posed further risks to the region’s financialstability, according to the report.-VNS/VNA
VNA
