Asian Development Bank (ADB) in a report today said that emerging East Asia’s local currency bond markets expanded at a faster pace in 2009,thus offering investors diversification and higher yields.
Outstanding volumes in emerging East Asia’s domestic bond markets grew by 16.5 per cent, up from 14.8 per cent as governments issued debt to fund fiscal stimulus measures and as foreign investors sought to tap the region’s fast growing economies, said ADB.
The development bank defines emerging East Asia as China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam. It said total bonds outstanding in these markets had reached US$4.4 trillion or some RM15 trillion.
The region comprised 6.7 per cent of the global bond market at the end of September, up from 2.1 per cent in 1996.
Bonds from governments and state-owned firms comprised 49 per cent of the outstanding debt at the end of 2009, compared with 50 per cent in 2008. Corporate debt comprised 30 per cent, up from 26 per cent, while central bank debt fell to 21 per cent from 24 per cent.
But risks could emerge from a reversal in recovery in developed economies, premature monetary policy tightening or destabilising capital inflows.
The ADB expects growth momentum to continue in 2010 as economic recovery gains traction and with the local corporate bond market remaining an additional funding source for borrowers in the region and providing an attractive asset class for investors.
Foreign holdings in Asia’s local currency government bond markets have been rising, reflecting the region’s quick economic recovery, appreciation pressures on their currencies and higher returns.
It showed foreigners owned 18.56 per cent in Indonesia, 11.64 per cent in Malaysia, 6.57 per cent in South Korea, 5.79 per cent in Japan and 3.31 per cent in Thailand as of December 2009, a steady climb over the past few years.
As long a foreigners have faith in our bonds, that should augur well for the economy in the long run.
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