The Asian Development Bank report released Monday said
the value of local currency bonds outstanding was up from $4.8 trillion at the
end of the April-June quarter and 17.2 percent higher than a year earlier.
The increase was driven by corporate bonds while growth
in sales of government bonds slowed as economic stimulus spending was wound
down, the ADB said.
"Companies are taking the opportunity to raise money
in Asia's local currency bond markets because of the growing demand from
investors," said Iwan Azis, who heads ADB's Office of Regional Economic
Integration.
Azis said foreign investors were attracted to Asian bonds
because of the region's strong economic growth and its higher interest rates
compared with developed economies where rates remain at record lows in the
aftermath of the global recession.
Emerging East Asia comprises China, Hong Kong, Indonesia,
South Korea, Malaysia, Philippines, Singapore, Thailand and Vietnam. Azis said
bond investors had not been deterred by measures taken by some governments to
slow the amount of foreign capital entering their markets. Export-reliant
countries worry the inflows will contribute to pushing their currencies higher,
making their products more expensive overseas, or that rapid reversal could
endanger their financial systems.
South Korea in early November indicated it would impose a
tax on foreign investment in government bonds. Indonesia in July announced a
minimum holding period for foreign investment in short-term government debt to
deter speculators and Thailand in October slapped a tax on foreign investment
in bonds.
There were $1.556 trillion of emerging East Asia
corporate bonds outstanding at the end of September. In local currency terms,
this was up 5.7 percent from the previous quarter and 23.8 percent higher than
the year before.
The corporate bond market now comprises 30 percent of
emerging East Asia's total local currency bonds outstanding.
"What we are seeing is a fundamental change in the
investor makeup in emerging East Asia's bond markets, Azis said. "Having
now become familiar with these markets, foreign investors are likely to see
them as a core part of their portfolios." Local currency government bonds
reached $3.550 trillion, 14.6 percent higher year-on-year and 1.9 percent
higher quarter-on-quarter but slowing from a 5.1 percent increase in the second
quarter from the first quarter.
As the People's Bank of China and authorities in Indonesia,
Korea, Hong Kong, Thailand and Vietnam limited sales of bonds, the growth of
emerging East Asia's government bond market slowed in the third quarter, the
report said.
Corporate bonds, after rapid growth in recent years, now
account for 30 percent of the region's overall bond market and have become the
driver of its growth, it said.
China and Indonesia had the fastest-growing corporate
bond markets at the end of September, both of which grew 10.9 percent on a
quarter-on-quarter basis, followed by Singapore, which grew 7.1 percent
quarter-on-quarter.
Growth of the Chinese market reflected the strength of
the medium-term note and commercial paper markets coupled with a recovery in
issuance by state-owned enterprises. The growth in the Indonesian and Singaporean
corporate markets reflected a strengthening of interest by foreign investment
funds.
