East Asia, PH bond markets growing despite uncertainties—ADB

MANILA, Philippines—The bond markets of emerging economies in East Asia, which includes the Philippines, collectively grew in the third quarter as demand for the region’s securities remained steady even with the global uncertainties triggered by the debt crisis in the eurozone.

Outstanding bonds issued by countries in the region amounted to $5.47 billion as of the end of the third quarter, up by 7.5 percent from $5.089 billion in the same period in 2010, according to a report from the Asian Development Bank.

Data from the “Asian Bond Monitor” of the ADB further showed that of the latest amount, the bigger share of $3.685 billion were in the form of government securities, while the balance of $1.786 billion were those issued by corporate entities.

Economists said the year-on-year growth in outstanding bonds in the region manifested the belief among portfolio investors in a favorable economic outlook for emerging markets, although it was dampened by prospects of declining export revenues due to weakening global demand.

On a quarter-on-quarter basis, however, the outstanding amount of bonds by the end of the July-September period marked a 1.1-percent drop from $5.531 billion by the end of the March-June period.

This decline was attributed to the fact that jitters caused by the prolonged crisis in the euro area dragged sentiment of investors for the global economy.

In the third quarter, some portfolio fund owners opted to liquefy their assets and hold on to cash amid concerns that the crisis, if unresolved soon, would eventually dampen growth performance even of emerging economies.

Emerging countries in East Asia, while performing better compared with their counterparts in the industrialized world, are seen to be adversely affected by the crisis in the Western region in terms of lower demand for their export products.

“The recent bouts of financial market volatility are a timely reminder of the region’s continued vulnerability to external shocks,” ADB said in the report.

For the Philippines alone, figures reflected the regional trend. Outstanding bonds from the country amounted to $74 billion by the end of September, up by 2.7 percent from $72 billion as of the same period last year.

The latest figure, however, was 1.2 percent down from $75 billion registered as of the end of June this year.

Of the $74 billion, the bigger share of $65 billion was in the form of government bonds, while the remaining $9 billion was the share of fixed-income instruments issued by the private sector.

The debt crisis in the eurozone has elicited suggestions for countries like the Philippines to reduce dependence on Western markets for their export earnings.

Emerging Asian economies have been advised to strengthen their export revenues by trading more with their Asian neighbors given that countries in the region are performing much better than the developed countries in the West in terms of growth rates.