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Eurozone crisis threatens emerging East Asia's booming bond markets

Business Materials 10 September 2012 18:35
Emerging East Asia’s local currency bond markets have expanded to nearly $6 trillion
Eurozone crisis threatens emerging East Asia's booming bond markets

Azerbaijan, Baku, Sept. 10 / Trend /

Emerging East Asia's local currency bond markets have expanded to nearly $6 trillion, but policymakers in the region should brace themselves for further shock and volatility from the global financial markets, says a report published by the Asian Development Bank (ADB).

"Our local currency bond markets are emerging as a safe haven in the midst of the crisis, but we should not be complacent," said Iwan J. Azis, Head of ADB's Office of Regional Economic Integration, which produced the Asia Bond Monitor report.

A special section in the Asia Bond Monitor assessing the performance of the local bond markets of the People's Republic of China (PRC), Indonesia, the Republic of Korea, Malaysia, the Philippines, and Thailand shows that the spillover of the Lehman Brothers' collapse and the ongoing eurozone crisis in many markets has been significant and may well continue. These spillover impacts will be felt not only in the bond markets but in other financial markets in the region too, including through foreign exchange rates.

The Asia Bond Monitor notes that despite the uncertainty and volatility in global financial markets, the bond markets in the region continue to expand, with $5.9 trillion in paper outstanding at the end of June, 1.9% more than at the end of March and 8.6% more than at the end of June 2011.

"The risks to the markets are growing. Those risks include worsening investor sentiment as global economic outlook dims, volatile capital flows, and excessive government bond sales to finance stimulus measures," the report said.

The quarterly Asia Bond Monitor assesses the bond markets of the PRC; Hong Kong, China; Indonesia; the Republic of Korea; Malaysia; the Philippines; Singapore; Thailand; and Vietnam.

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