Phl bond market logs fastest growth in E Asia

MANILA, Philippines – The Philippine bond market posted the fastest growth in emerging East Asia in January to September this year, according to a report released by the Asian Development Bank (ADB).

The country’s corporate bond market expanded 11.3 percent in the third quarter, and 37.6 percent to $17 billion after nine months in 2014.

“It is the fastest quarterly and annual increases in emerging East Asia, fueled by offerings from SM Prime Holdings Inc., GT Capital Holdings Inc., Aboitiz Power Corp., and Security Banking Corp., which led bond and Tier 2 note issuances during the July-September period, ADB said.

The report likewise stated that the Philippine government bond market expanded 0.7 percent in the third quarter and 2.2 percent in the first nine months of 2014 to $86 billion.

The Bureau of Treasury (BTr), however, has rejected some bids for its Treasury bills as the market continued to seek higher yields amid rising inflationary concerns and the central bank policy rate increases.

Meanwhile, the ADB’s latest Asia Bond Monitor (ADM) said a faster-than-expected US interest rate hike and a stronger dollar could pose problems for East Asia.

ADB Office of Regional Economic Integration head Iwan J. Azis said higher US rates and a stronger dollar could prove to be a challenge given increased foreign holdings of Asia’s bonds, which could easily reverse, and record US dollar bond issuance by the region’s companies.

“US dollar debt becomes more expensive to service in local currency terms when the dollar appreciates,” Azis added.

Other challenges may rise from tightening liquidity in the region’s corporate bond markets as Basel 3 requirements deter banks from holding large bond inventories, and a weaker property market in the People’s Republic of China (PRC), given many property developers are highly indebted.

Meanwhile, borrowers from emerging East Asia sold $143.5 billion in dollar, euro, or yen-denominated bonds in the first nine months of 2014, a new annual record and surpassing the $141.5 billion issued in the whole of 2013.

China is the largest issuer, selling $65.9 billion – or 46 percent of the total – followed by the Republic of Korea which sold $26.3 billion.

Despite the risks, emerging East Asia’s local currency bond markets continue to expand.

After nine months, there were $8.2 trillion in such bonds outstanding, 3.1 percent higher than at the end of June and 11.3 percent more than a year earlier. –Ted P. Torres (The Philippine Star)