East Asian bond markets grew by 7.7% in Q2

The bond markets of emerging countries in East Asia, including the Philippines, grew in the second quarter from a year ago, according to the latest issue of the Asia Bond Monitor (ABM) of the Asian Development Bank.

The ADB said in the report that the growth in the region’s bond markets was partly driven by the increase in the issuance of government securities and corporate bonds sales.

Data from the ABM showed that the outstanding bonds in emerging East Asia reached $5.5 trillion as of the end of June this year. This represented a 7.7-percent rise from the level in the same period last year and a 2.4-percent growth from that in the first quarter of this year.

In the Philippines, alone, outstanding bonds in the domestic market amounted to $75 billion as of the end of the second quarter of this year, up by 13.3 percent from year-ago level and by 3 percent from the end-March 2011 figure.

“Capital flows into emerging East Asian bond markets remain strong as investors chase yields,” the ADB said in the report.

The ADB cited favorable economic fundamentals in the region, the appreciation of the region’s currencies against the US dollar and the wider interest rate differential between countries in the region and the United States.

While the US Federal Reserve kept its interest rate at near zero, Asian central banks raised their rates. This prompted fund managers to buy more securities from emerging markets in the region.

On the supply side, higher expenditure requirements, such as for expansion, of corporations prompted them to sell more bonds.

Compared with the United States and countries in the Euro zone, developing countries in Asia have been posting better growth rates in recent years. This has attracted more portfolio funds into the region, the ADB said.

The foreign lender said, however, that there was a likelihood that East Asian economies would post slower growth rates in the second half compared with the first-half level due to the ill-effects of the anemic global economy, which was due to the problems confronting the United States and countries in the Euro zone.

The Philippines and its neighbors are expected to post lower export income in the second semester as demand from the United States and Europe are likely to decline.

Nonetheless, the ADB said East Asian economies were seen to perform better in the second half compared with Western economies.

“Growth in emerging East Asian economies is expected to moderate, yet remain relatively strong, in the second half of 2011,” the ADB said in the report.

In the case of the Philippines, it grew by 3.4 percent in the second quarter and by an average of 4 percent in the first semester from a year ago.

The first-semester growth fell below the government’s expectation of between 4.5 and 5.5 percent, and elicited expectations that the economy might find it difficult to hit the full-year average growth target of between 5 and 6 percent.

The country’s growth rate and those of its neighbors are much better, however, compared with those of the United States and some European economies, many of which grew by only less than 3 percent.