Corporate issuance drives local Asia bond markets to $5 trillion: ADB

By Jennifer Chiou

New York, Nov. 30 - The November edition of Asian Development Bank's quarterly Asia Bond Monitor indicated that a rapid rise of corporate bond issuance in emerging East Asia has driven the growth in the region's local currency bond markets to just over $5 trillion.

Emerging East Asia includes China, Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

In a company news release, ADB said that the report shows there were $1.556 trillion of corporate bonds outstanding at the end of September, 23.8% more in local currency terms than a year earlier and 5.7% more than at the end of June.

"Companies are taking the opportunity to raise money in Asia's local currency bond markets because of the growing demand from investors, particularly overseas investors," Iwan Azis, head of ADB's Office of Regional Economic Integration, said in the release. Azis' office produced the report.

"Foreign interest has risen, given Asia's favorable growth fundamentals, lower interest rates in mature markets and despite administrative measures in some countries to limit capital inflows," Azis added.

The report noted that local currency government bonds in emerging East Asia totaled $3.55 trillion, 14.6% higher year over year and 1.9% higher quarter over quarter.

ADB stated that the slower growth came with many countries now paring their fiscal stimulus packages and with some central banks opting to slow sterilizing bond sales.

The quarterly further said that the fastest growing corporate bond markets at the end of September were China and Indonesia, both of which grew 10.9% on a quarter-for-quarter basis, followed by Singapore's corporate bond market, which grew 7.1% from one quarter to the next.

Growth in the Indonesian and Singaporean corporate markets reflected growing interest by foreign investment funds in these markets, which has helped improve the liquidity of these markets this year, the report added.

"What we are seeing is a fundamental change in the investor makeup in emerging East Asia's bond markets. Having now become familiar with these markets, foreign investors are likely to see them as a core part of their portfolios," Azis said.

The Annual Bond Market Liquidity Survey, conducted by AsianBondsOnline and released along with the quarterly Asia Bond Monitor, showed liquidity in emerging East Asia's bond markets continues to increase due to rising foreign investor interest in the markets and increasing investor diversity, according to the release.

ADB said that efforts to consolidate bond issues and increase the size of benchmark offerings in Singapore, Korea and the Philippines also helped.

The financial institution promotes economic and social progress in the Asia-Pacific region and is based in Manila, the Philippines.

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