Asia Pacific News

Improved outlook, vaccine progress lift emerging east Asian bond markets

An improving global economic outlook and progress on coronavirus disease (Covid-19) vaccinations have pushed up bond yields in emerging east Asia. Local currency bond markets in the region expanded to 20.1 trillion dollars by the end of 2020, according to the latest issue of the Asian Development Bank’s (ADB’s) bond monitor. Investor sentiment and financial conditions also improved.

“Bond markets in emerging East Asia continued to grow, mobilizing funding for the region’s sustainable recovery from the pandemic,” said ADB Chief Economist Yasuyuki Sawada. “Successful vaccination campaigns, accommodative monetary policy stances, and easing of restrictions are spurring economic activity and shifting the recovery into a higher gear.”

Emerging East Asia comprises China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Vaccine rollouts have started in most markets in the region, lifting confidence, according to the report. At the same time, the uncertainty of the pandemic’s trajectory, particularly concerning new variants and a possible resurgence in cases, continue to weigh on the development outlook.

Uneven vaccine access and a potential adjustment in asset prices due to an escalation of long-term interest rates also pose risks. Government bond yields in most advanced economies and emerging east Asian markets increased between December 31, 2020, and February 15, 2021. Meanwhile, improved sentiment boosted most equity markets and regional currencies. Capital flows into the region’s equity and bond markets also recovered in the last quarter of 2020.

Emerging East Asia’s local currency bond market reached 20.1 trillion dollars at the end of December 2020, 3.1 percent higher than the preceding quarter and 18.1 percent higher than a year earlier. The size of the bond market grew to the equivalent of 97.7 percent of the region’s gross domestic product at the end of the fourth quarter of 2020. Local currency bond issuance stood at 2 trillion dollars.

Government bonds dominated the region’s bond stock at 12.4 trillion dollars as of December-end while corporate bonds amounted to 7.7 trillion dollars. China remained the region’s largest bond market, accounting for 77.4 percent of emerging East Asia’s total bond stock.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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