ADB: Emerging East Asia issuance reaches $803 billion in first quarter

By Angela McDaniels

Tacoma, Wash., June 4 - Local-currency bond issuance in emerging East Asia totaled $803 billion in the first quarter of 2013, a 2.2% increase over the fourth quarter of 2012, according to the Asian Development Bank's quarterly Asia Bond Monitor.

ADB said this increase, however, stemmed entirely from a 9.9% increase in issuance by central banks and monetary authorities, especially issuance by the Hong Kong Monetary Authority. The authority's issuance in the first quarter was $222 billion, equivalent to 57% of the region's total issuance by central banks and monetary authorities of $387 billion.

Emerging East Asia is defined as the People's Republic of China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Issuance of treasury bills, bonds and other central government paper rose only 0.6% in the first quarter while corporate bond issuance fell by 8.1%.

China was the largest issuer of both government and corporate bonds in the first quarter.

China issued $117 billion of treasury bonds and bills, accounting for 57% of the region's $204 billion total issuance of government paper. It was followed by Singapore ($34 billion) and South Korea ($21 billion).

Issuance of corporate bonds totaled $89 billion in China in the first quarter, accounting for 42% of the region's total corporate issuance of $212 billion. It was followed closely by Korea with $88 billion of corporate bond issuance.

Amount outstanding increases

The total amount of outstanding bonds in emerging East Asia's local-currency market increased to $6.7 trillion at the end of the first quarter. This is an increase of 12.1% year over year and an increase of 2.9% quarter over quarter.

ADB said the increase was driven by growth in corporate bonds, which grew 19.5% year over year and 4.6% quarter over quarter to $2.4 trillion at the end of March.

Meanwhile, the government bond market grew at a more modest annual pace of 8.3% and a quarterly rate of 2% to $4.3 trillion.

The five most rapidly growing markets in the first quarter on a quarter-over-quarter basis were Vietnam (20.8%), Indonesia (5.9%), Singapore (5.1%), Hong Kong (3.6%), South Korea (3.1%) and China (3%).

Vietnam registered the most rapid year-over-year growth in the government bond market, posting a 64.6% expansion to $29 billion, fueled by heavy issuance of treasury, central bank and state-owned enterprise bonds. In contrast, the country's corporate bond market shrank 47.2% to $1 billion.

Foreign investment increases

ADB said foreign holdings of most emerging East Asian local-currency government bonds continued to rise in the first quarter.

Foreign holdings accounted for 32.6% of Indonesian local-currency government bonds at the end of March, the largest among emerging East Asian economies. Malaysia followed closely with foreign holdings reaching 31.2%.

The largest increase of foreign holdings of government bonds over the past year was in Thailand, where the foreign share rose to 17.6% in March from 12.2% in March 2012.

Ratio to GDP

ADB said the region's local-currency bond markets now constitute a larger portion of their economies than they did three months or even a year ago at 54.8% of gross domestic product at the end of March, versus 54.6% at the end of December and 52.8% at the end of March 2012.

The ratio of government bonds to GDP remained flat in the first quarter at 35% of GDP, while the ratio of corporate bonds outstanding to GDP rose marginally to 19.8% in the first quarter from 19.6% in the fourth quarter of 2012.

The two markets with the largest ratios of local-currency bonds outstanding to GDP in the first quarter were South Korea and Malaysia, with ratios of 121.5% and 105%, respectively.

G3 currency issuance

The amount of bond issuance denominated in G3 currencies - the dollar, the euro and the Japanese yen - was $39.3 billion in the first quarter. This was followed by another $21.6 billion between April 1 and May 5. ADB said this suggests that G3 currency issuance in emerging East Asia could reach or surpass the record level of $131 billion reached in 2012.

More than one-third of the year-to-date G3 currency issuance, a total of $22.2 billion, has come from China. It was followed by Hong Kong ($11.9 billion), South Korea ($8.4 billion) and Indonesia ($5.6 billion).

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