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Developing Asia bond market expands 12.8% in first half: ADB
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09:30, September 15, 2009

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Emerging East Asia's bond markets expanded 12.8 percent year-on-year in the first half of 2009 as the region is recovering from the global economic downturn, the Asian Development Bank (ADB) said in a report released Tuesday.

At the end of June, emerging East Asia had 3.94 trillion U.S. dollars in local currency bonds outstanding, 5.2 percent more in local currency terms than at the end of March, said the latest issue of Asia Bond Monitor.

"Massive economic stimulus programs combined with equally aggressive monetary easing appear to have breathed some life into financial markets," it said. "Credit spreads have narrowed; corporate default risk has decreased; and stock markets staged a turnaround, with emerging Asia leading the way."

The ADB report tracks bond market developments in Chinese mainland; Hong Kong, China; Indonesia; South Korea; Malaysia; the Philippines; Singapore; Thailand; and Vietnam.

The strongest improvements in year-on-year bond market growth rates in the first half were seen in Hong Kong (19.4 percent); Chinese mainland (14.8 percent); South Korea (13.1 percent); Indonesia (12.3 percent); and the Philippines (8.2 percent), the report said, while Hong Kong, Chinese mainland, South Korea, and Singapore registered stronger quarter-on-quarter growth.

ADB said the strong recovery of growth in emerging East Asia's local currency bonds outstanding was led by strong primary corporate debt markets and government bond issuance in support of fiscal stimulus.

Government issuance jumped 59.8 percent in the second quarter of the year from the first quarter, and was 38.0 percent higher than in the second quarter of 2008. Corporate issuance rose 26.8 percent on quarter and leapt 90.6 percent on year.

The report said the corporate sector has notably emerged as a more significant driver of growth than government issuance due to large funding needs for energy and infrastructure investments, as well as bank issuance to support capital adequacy ratios.

Continued growth of the emerging East Asian bond market in recent years has given it respectable bulk, now reaching 40 percent of the size of Japan's bond market, the report said.

Emerging East Asia comprised 6.2 percent of the total worldwide bond market at end-2008 compared to 2.0 percent in 1996, it added.


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