Vietnam’s Government bond segment contracted 7.8 percent quarter-on-quarter at the end of June to reach 50.1 billion USD, accounting for 86.2 percent of the country’s total bond stock. (Photo: baodautu.vn) Hanoi (VNS/VNA) - The improvement of global investment sentimentand financial conditions has provided a much-needed lift for local currencybond markets in emerging East Asia, including Vietnam, despite risks from theCOVID-19 pandemic, according to the latest issue of the Asian DevelopmentBank’s (ADB) Asia Bond Monitor.
Government bond yields in most emerging East Asian markets declined from June15 to September 11 on the back of accommodative monetary policies and weakeninggrowth across the region. Meanwhile, improving sentiment has led to gains inequity markets and a narrowing of credit spreads, with most regional currenciesstrengthening against the dollar.
Local currency bonds outstanding in emerging East Asia reached 17.2 trillion USDat the end of June, up 5 percent from March this year and 15.5 percent higherthan in June 2019.
The report showed that Vietnam’s local currency bond market decreased by 1.7 percentat the end of June this year to reach $58.2 billion, after posting 10.4 percentquarterly growth in the first quarter. This is mainly due to lower outstandingdebt in the Government area, even as the corporate bond stock increased.
Vietnam’s Government bond segment contracted 7.8 percent quarter-on-quarter atthe end of June to reach 50.1 billion USD, accounting for 86.2 percent of thecountry’s total bond stock. Corporate bonds, however, surged by 65.6 percent inthe second quarter compared to the first, reaching 8 billion USD.
On an annual basis, growth in corporate bonds stood at 76 percent at the end ofJune this year.
ADB Chief Economist Yasuyuki Sawada said governments in the region have beenagile in dealing with the impact of the COVID-19 pandemic through a wide rangeof policy responses, including monetary easing and fiscal stimulus.
“It is crucial that governments and central banks maintain accommodativemonetary policy stances and ensure sufficient liquidity to support financialstability and economic recovery,” Sawada said.
Emerging East Asia consists of China, Hong Kong of China, Indonesia, the Republicof Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
As a share of regional gross domestic product, emerging East Asia’s localcurrency bonds outstanding climbed to 91.6 percent at the end of June, from87.8 percent in March, mainly due to the large amount of funding needed tofight the pandemic and its impact.
Bond issuance in the region hit 2 trillion USD in the second quarter, up by21.3 percent from the first quarter this year. China remained home to theregion’s largest bond market, accounting for 76.6 percent of the region’s totalbond stock as of the end of June.
The region’s government bonds outstanding reached 10.5 trillion USD at the endof June and made up 60.8 percent of the region’s aggregate bond stock. Corporatebonds, meanwhile, totalled 6.7 trillion USD.
The ADB said that a worsening and prolonged COVID-19 pandemic that could dentthe region’s economic outlook. Developing Asia will contract by 0.7 percentthis year, its first contraction in six decades. Growth will rebound to 6.8 percentin 2021.
Other risk factors include potential social unrest due to the pandemic’seconomic impact, as well as continuing tensions between China and the US, ADBexperts said./.
VNA
