KUALA LUMPUR – The improving global economic outlook and progress on Covid-19 vaccinations have boosted bond yields in emerging East Asian economies, as the regional local currency bond markets expanded to US$20.1 trillion (RM83.4 trillion) by the end of 2020, said Asian Development Bank (ADB).
Emerging East Asia comprises Hong Kong, China, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
According to the latest issue of ADB’s Asia Bond Monitor report, investor sentiment and financial conditions have also improved, with the local currency bond issuance at US$2 trillion.
“Bond markets in emerging East Asia continued to grow, mobilising funding for the region’s sustainable recovery from the pandemic,” ADB chief economist Yasuyuki Sawada said in a statement today.
He said successful vaccination campaigns, accommodative monetary policy stances and easing of restrictions were spurring economic activity, shifting the recovery into a higher gear.
According to the report, vaccine roll-outs have started in most markets in the region, boosting confidence.
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, it added.
ADB said the uneven vaccine access and a potential adjustment in asset prices due to an escalation of long-term interest rates also pose risks.
Meanwhile, government bond yields in most advanced economies and emerging East Asian markets increased between December 31, 2020 and February 15, while improved sentiment boosted most equity markets and regional currencies.
Government bonds dominated the region’s bond stock at US$12.4 trillion as of end-December 2020, while corporate bonds amounted to US$7.7 trillion.
China remained as the region’s largest bond market, accounting for 77.4% of emerging East Asia’s total bond stock.
Capital flows into the region’s equity and bond markets also recovered in the last quarter of 2020, said ADB.
It also noted that the bond market grew to the equivalent of 97.7% of the region’s gross domestic product at the end of the fourth quarter of last year. – Bernama, March 26, 2021
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