Vietnam’s bond market records fastest quarterly growth in emerging East Asia: ADB

Friday, 2020-11-27 09:27:11
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NDO – Vietnam’s local currency bond market posted a strong quarterly growth of 11.6% at the end of September this year – the fastest quarterly growth rate in emerging East Asia, according to the latest quarterly issue of the Asian Development Bank’s (ADB) Asia Bond Monitor.

Accordingly, Vietnam’s bond market reached US$65.3 billion as of September, with the fastest growth rate in emerging East Asia, thanks to the expansion in both the government and corporate bonds segments.

The country’s government bond segment grew 9.1% quarter-on-quarter to reach US$54.7 billion by the end of September 2020, accounting for 83.8% of the country’s total bond stock.

Meanwhile, corporate bonds sustained growth momentum, increasing by 26.9% quarter-on-quarter to reach US$10.6 billion in the third quarter of 2020. On an annual basis, growth in corporate bonds stood at 129.1% at the end of September this year.

On the continental scale, local currency bonds outstanding in emerging East Asia, which includes China, Hong Kong (China), Indonesia, the Republic of Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam, reached US$18.7 trillion at the end of September, a 4.8% expansion from June this year and 17.4% higher than a year ago.

Emerging East Asia’s bond issuance in the third quarter climbed to US$2.2 trillion, up 6.4% quarter-on-quarter and 39.8% year-on-year, as governments borrowed to support large-scale stimulus programmes.

As a share of gross domestic product (GDP), emerging East Asia’s bond market rose to 95.6% at the end of September, from 91.6% 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.

Government bonds remain the dominant contributor to the region’s bond market, totalling US$11.5 trillion at the end of September. Corporate bonds reached US$7.2 trillion.

However, according to the report, 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.

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

The latest issue of Asia Bond Monitor features four discussion boxes exploring COVID-19’s impact on global financial markets and capital flow dynamics; financial stability in Southeast Asia; local currency bond markets and exchange rate risks; and the duration of recoveries from economic shocks.

The report also looks at how sustainable finance can contribute to green and inclusive development in the post-COVID-19 era, in addition to the link between bank efficiency and bond market development.