PH 2nd-fastest growing bond market in East Asia as of Q3, says ADB
By Michelle V. Remo
Philippine Daily Inquirer
The bond market in the Philippines was the
second-fastest growing among emerging economies in East Asia as of the third
quarter, as the country’s buoyant economy boosted appetite for peso-denominated
instruments.
The Asian Development Bank said in a
recent report that outstanding bonds in the local bond market registered one of
the fastest growth rates in the region as of end-September, as economic problems
in Europe and the United States prompted investors to seek higher yields in
Asia.
The Philippines was one of the most
preferred sites for portfolio investments given a favorable outlook on its
economy, the ADB said.
According to the ADB report, the
outstanding amount of local currency-denominated bonds from the Philippines
reached a dollar equivalent of $91 billion as of the end of September, up by
21.8 percent from that in the same period last year.
Only Singapore posted a faster growth rate
of 25.8 percent.
In absolute terms, however, the amount of
outstanding bonds in the Philippine market was lower than that for most
countries in the region.
Industry players admit that the country’s
capital market remains small compared with its regional counterparts.
Growth rates and outstanding amounts of
bond markets in the region are as follows: Vietnam, 21.1-percent growth to $21
billion; Malaysia, 20.7-percent growth to $318 billion; South Korea,
16.2-percent growth to $1.37 trillion; China, 12.5-percent growth to $3.65
trillion; and Hong Kong, 3.7-percent growth to $176 billion.
Contradicting the trend in the region, the
bond market of Indonesia fell by 0.6 percent to $110 billion.
For the entire region, the outstanding
amount of bonds thus stood at $6.24 trillion, rising year on year by 13.9
percent.
“Volatility spillover was directly
transmitted to Asian local bond markets during the US and eurozone crises,” said
the ADB as it noted the shift in investor appetite to instruments issued from
emerging Asian markets.
It said the appetite for portfolio
instruments from emerging Asian economies was also reflected in the increase in
demand for equities, currencies and money market instruments in the region.
Data on the Philippines also showed that
of the P3.8 trillion (or $91 billion) in outstanding bonds by the end of
September, about P3.3 trillion was accounted for by government securities while
corporate bonds accounted for the balance of P500 billion.
The outstanding amount of Philippine
government securities represented a year-on-year growth of 14.7 percent, while
that of corporate bonds marked an annual growth rate of 26.1 percent, the ADB
said.
Although the increase in foreign portfolio
investments is a welcome development, monetary officials said excessive amounts
and steep increase could be destabilizing to an economy.
They said these can cause sharp and sudden
appreciation of the local currency against the US dollar, adversely affecting
exporters.
This is why the Bangko Sentral ng
Pilipinas has implemented several measures against excessive inflows.
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