Philippine bond market among fastest growing in East Asia

MANILA, Philippines — The Philippine local currency (LCY) bond market was among the fastest-growing in Emerging East Asia in the second quarter of the year, according to the latest Asia Bond Monitor of the Asian Development Bank (ADB). 

The Manila-based multilateral bank said the LCY bond market in the region remained buoyant in the second quarter despite downside risks from trade conflicts, a faster-than-expected slowdown in China and slowing global growth. 

Emerging East Asia comprises China, Hong Kong, China, Indonesia, Korea, Malaysia, Philippines, Singapore, Thailand and Vietnam.  

Outstanding LCY bonds in the region totalled $15.3 trillion at the end of June, up by 3.5 percent in dollar terms from end – March and by 14.2 percent compared with the second quarter of June 2018. 

The size of the Philippine LCY bond market rose by 1.8 percent quarter-on-quarter to P6.707 trillion ($131 billion) in the quarter ending June from P6.588 trillion ($125 billion) in end-March. 

Year-on-year, the local LCY bond market rose 16.8 percent from P5.741 trillion ($108 billion) in the second quarter of 2018. 

In both comparative periods, growth was driven by both the government and corporate segments. 

As of June 2019, the top 10 issuers of corporate bonds were Ayala Land, SM Prime Holdings, Metrobank, BDO Unibank, SMC Global Power, San Miguel, Philippine National Bank, Security Bank, SM Investments and Petron Corp. 

ADB noted that despite prevailing risks in the region, foreign investment in Emerging East Asia remained stable in the second quarter, with foreign holdings of LCY bond rising in China and Indonesia, but falling back in Korea, Malaysia and the Philippines because of a host of domestic factors. 

The Philippines saw a decline in its foreign holdings share to five percent at the end of June from 6.3 percent at the end of March as investors took profits amid declining bond yields driven by slowing inflation. 

ADB chief economist Yasuyuki Sawada said taking into consideration a potential shift in investor sentiment, markets must deepen LCY bond markets to attract reliable source of local funding. 

“Foreign investment in Emerging East Asia remains stable but there are still considerable potential risks. Financial stability in the region could be undermined if global investors change their views on on emerging markets,” he said.