PHL bond market among the Top 5 fastest growing in East Asia – ADB

The Philippine bond market was among the five fastest growing in emerging East Asia in the third quarter, supported by state and corporate borrowings, Manila-based Asian Development Bank (ADB) said in a new report. 

 

The fastest growing debt markets were Vietnam which grew by 18.8 percent annually, Indonesia by  16.3 percent, China by 14.4 percent, Philippines by 12.5 percent, and South Korea by 10.4 percent, the multilateral lender noted in its Asia Bond Monitor released Monday.

 

Emerging East Asia’s outstanding local currency bonds grew 12.5 percent year-on-year to $7.1 trillion (roughly P312 trillion) in July to September, “propelled by growth in both the government and corporate bond sectors.”

 

China, Hong Kong, Indonesia, South Korea, Malaysia, Philippines, Singapore, Thailand, Vietnam comprise emerging East Asia. 

 

For the Philippines, ADB said growth in the bond market was mainly stoked by Treasury bills and bonds. The lender noted a 13.6 percent expansion in the government bond market to $86 billion (P3.78 trillion), while corporate bonds grew by 5.8 percent to $13 billion (P572 billion). 

 

In the third quarter, Ayala Group's Ayala Land Inc. issued corporate bonds worth P15 billion and Globe Telecom Inc. floated P7 billion. Banco de Oro Unibank and Philippine National Bank were the next largest issuers 2013, raising P5 billion each, data collected by ADB showed. 

 

Emilio Neri Jr., lead economist at listed Bank of the Philippine Islands (BPI), sees the increase in bonds sustained by homegrown firms which are scrambling to tap the local market for financing. 

 

“The peso liquidity is much, much more accomodative and conducive for bond issuance,” he said in a telephone interview Monday.  

 

Neri noted government has been “aggressively” borrowing from domestic creditors as the Philippines preferred to not to contract new foreign currency loans this year. 

 

The Fed taper buzz

Emerging East Asia's bond markets strengthened anew from recent losses as global financial markets stabilized after the Federal Reserve announced that it will keep its bond purchases intact until the US economy firms up.  

 

“A delay in US bond tapering gives the region a bit of extra time to make sure its economy and financial systems are resilient enough to face the likely market volatility ahead,” Iwan J. Azis, head of ADB’s Office of Regional Economic, Integration which produced the Asia Bond Monitor, said in a statement tied with the report. 

 

Risks to the local currency bond markets in the region once the Fed finally starts withdrawing its stimulus include sudden shifts in global investor sentiment, tighter liquidity conditions, and volatile capital flows that makes efforts by policymakers to stabilize the economy more difficult, ADB said. 

 

In a separate telephone interview, a peso bond trader at a Philippine bank, who requested anonymity to shield their position, said liquidity is “not a concern” for the Philippine bond market.

 

“Right now, everyone expects the taper, we think yields will remain range bound,” the trader said, adding that foreign funds have already withdrawn placement in bonds that carry a longer tenor. 

 

Limits placed by Bangko Sentral ng Pilipinas on its short-term deposit facility pumped cashed into the bond market. “There's excess liquidity in the market.”

 

Money supply grew by 31.0 percent to P6.2 trillion in September year-on-year, latest central bank data showed.  
 

“To a large extent, the situation in the Philippines is very different from the region. We did not expose ourselves too much to foreign leverage,” Neri said. – VS, GMA News