Financial markets in the Philippines grew at a more muted pace in the first quarter of the year as more investors and issuers held back due to uncertainties over global conditions.
In a report, the Asian Development Bank (ADB) said Asia’s bond markets remained healthy, but concerns from overseas cast a shadow on the region, putting investors on edge.
Growth in outstanding bonds in the Philippines was among the slowest in the region, just ahead of Singapore, which saw its bond market flatten quarter-on-quarter, and Malaysia where outstanding bonds contracted.
The expansion in the Philippines also came mainly from the continued issuance of government IOUs to support the state’s finances. Private sector issuers were mostly absent from January to March as companies weighed their options amid rising rates, which made debt proceeds more expensive for borrowers.
“Emerging East Asia’s bond markets were volatile due to rising global concerns over the unresolved Greek debt crisis and possibility of an interest rate hike in the United States,” the ADB said in its quarterly Bond Monitor report released on Tuesday.
“Global interest rates, which had been falling up until April, started picking up in early May,” the Philippines-based multilateral lender said.
The ADB said contributing factors to the rise in rates included the protracted negotiations over the Greek debt crisis, firmer oil prices, improving economic indicators in the United States in April and May, and faster first-quarter growth in the eurozone.
Local currency bonds in the Philippines grew by just 0.4 percent in the first quarter from the preceding three-month period to total $105 billion, the ADB said. The entire region’s local currency bonds rose 1.6 percent in the same period.
“Growth came solely from an increase in the stock of treasury bonds while the stocks of treasury bills… and corporate bonds contracted during the review period,” the ADB said.
“Corporate issuers remained on the sidelines as speculation over the timing of a US policy rate hike,” which would lead to higher rates, made it “more costly to raise capital in the bond market,” it added.
Of the 51 Philippine companies that were previously active in bond markets, only Robinson’s Land Corp. issued new IOUs in the first quarter of the year, raising P12 billion from the sale of medium- to long-term debt paper.
Only Malaysia, which posted a 2.7-percent quarter-on-quarter decline, and Singapore, which saw growth slow to 0.1 percent, performed worse than the Philippines.