Illustrative image (Photo: VNA)
Hanoi (VNA) - Emerging East Asia’s total local currency bond issuance rose 7.1% to an all-time high of 9 trillion USD in 2021, according to the latest issue of the Asia Bond Monitor, released on March 25 by the Asian Development Bank (ADB).
For the last three months of the year, emerging East Asia’s local currency bond stock grew 3.6% from the previous quarter to 22.8 trillion USD. Bond yields in the region rose between November 30, 2021 and March 9 this year, amid global inflationary pressure and rising yields in advanced markets.
Member economies of the Association of Southeast Asian Nations (ASEAN) saw record-high local currency bond issuance of 1.5 trillion USD last year. That accounted for 17% of the total issuance in emerging East Asia, which comprises China, Hong Kong (China), Indonesia, the Republic of Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
Government bonds outstanding in the region totalled 14.3 trillion USD at the end of 2021, while corporate bonds increased to 8.5 trillion USD. Growth in the corporate bond segment eased in the final quarter of the year, amid a slowdown in China - the region’s largest corporate bond market.
In Vietnam, faster growth in both the government and corporate bond segments pushed the local currency bond market up by 9.8% from the previous quarter to 91.5 billion USD at the end of December 2021. Annual growth also quickened, to 25.5%.
Government bonds increased 5.3% from the previous quarter to 65.3 billion USD. A jump in issuance drove an expansion of 22.7% in the corporate bond segment. Corporate bonds outstanding totalled 26.3 billion USD, the Asia Bond Monitor said.
The report noted that sustainable bond stock in the ASEAN region plus China, Hong Kong (China), Japan, and the Republic of Korea rose to 430.7 billion USD at the end of 2021 from 274.1 billion USD a year earlier. Green bonds continue to dominate the region’s sustainable bond market, accounting for 68.2% of the total, although interest in social and sustainability bonds is also growing.
“Financial conditions in emerging East Asia remain robust, backed by ample liquidity,” said ADB Chief Economist Albert Park.
“Most central banks in the region have maintained accommodative monetary stances, even as advanced economies tightened policies. However, continued inflationary pressure may cause more central banks around the world to tighten, which could reduce liquidity and weaken financial conditions,” he added.
Risk premiums have edged up amid dampened investor sentiment due to expected monetary tightening by the United States Federal Reserve and the Russia - Ukraine conflict. The Federal Reserve hiked interest rates on March 16 for the first time since 2018 and signalled additional increases on the horizon as inflation picks up, partly due to war-related increases in oil and food prices. Global supply chain disruptions and the uncertain trajectory of the COVID-19 pandemic are also threatening the global economic outlook, according to the report.
The latest issue of the Asia Bond Monitor features discussions of foreign participation in the Asian local currency bond market and associated financial stability risks, as well as determinants of sovereign local currency bond issuance in emerging markets. The issue also presents the results of the 2021 AsianBondsOnline Annual Bond Market Liquidity Survey.
Established in 1966, the ADB is owned by 68 members, including 49 from the region. The bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty./.
