Emerging East Asian bond markets expand amid COVID-19: ADB

Emerging East Asia’s bond issuance in the third quarter climbed to $2.2 trillion, up 6.4 percent quarter on quarter and 39.8 percent year on year, as governments borrowed to support large-scale stimulus programs, the Asian Development Bank (ADB) said on Wednesday.

The latest quarterly issue of the ADB’S Asia Bond Monitor showed that local currency bonds outstanding in emerging East Asia reached $18.7 trillion at the end of September, a 4.8-percent expansion from June this year and 17.4 percent higher than a year ago, Xinhua reported.

As a share of gross domestic product (GDP), emerging East Asia’s bond market rose to 95.6 percent at the end of September from 91.6 percent at the end of June. The rising share of bonds outstanding to GDP was mainly due to regional governments’ increased financing to combat the adverse effects of the COVID-19 pandemic, the ADB said.

“We saw an improvement in the global investment sentiment, but uncertainty over the trajectory of the coronavirus disease (COVID-19) pandemic still weighs on the region’s economic outlook,” said ADB Chief Economist Yasuyuki Sawada. “The region’s large and growing local currency bond markets can help finance a sustainable and inclusive post-coVID-19 recovery.”

The ADB said that government bonds remain the dominant contributor to the region’s bond market at $11.5 trillion at the end of September. Corporate bonds reached $7.2 trillion. China is the largest local currency bond market, comprising 77.5 percent of emerging East Asia’s total bond stock.

COVID-19 remains the biggest downside risk to emerging East Asia’s bond market and the global outlook, particularly the possibility of new waves of positive cases and related lockdowns and other restrictions on economic activities, among other reasons, the ADB said.

Emerging East Asia comprises China, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.