Emerging East Asia’s financial conditions have shown signs of improvement, with bond yields declining as inflation moderates and interest rate cuts are expected, according to the Asian Development Bank’s (ADB) latest Asia Bond Monitor report.

The report highlights that regional financial markets have rebounded since July, following signals from the United States (US) Federal Reserve about a potential policy rate cut in September. During this period, currencies across Emerging East Asia appreciated against the US dollar, and risk premiums narrowed. Meanwhile, regional equity markets gained except for in the People’s Republic of China (PRC) and Hong Kong, China, where weak economic performance weighed on equity performance. Overall, Emerging East Asia saw equity market inflows of $7.6 billion during the review period.

“Forthcoming policy rate cuts in both advanced and regional markets will enhance financial conditions in Emerging East Asia,” ADB chief economist Albert Park said in a press release. However, he noted that challenges remain, including weaker-than-expected economic performance in the PRC and rising geopolitical tensions. Still, the ADB believes the regional financial outlook remains balanced.

Emerging East Asia’s financial conditions are improving, driven by moderating inflation, declining bond yields and anticipated interest rate cuts, as per the Asian Development Bank’s Asia Bond Monitor.
The region’s financial markets rebounded as the US Federal Reserve signalled potential rate cuts.
Despite weaker economic performance in PRC and Hong Kong, equity inflows reached $7.6 billion.

Emerging East Asia includes member economies from the Association of Southeast Asian Nations (ASEAN), the PRC, Hong Kong, China, and the Republic of Korea (ROK).

The region’s local currency bond market expanded by 2.3 per cent from the previous quarter, reaching $25.1 trillion by the end of June. Government bonds in the region saw quarterly growth of 2.8 per cent, largely driven by increased treasury bond issuance in the PRC to support economic activities. The corporate bond market also grew by 1.5 per cent, with PRC banks ramping up debt sales to meet regulatory capital requirements.

Sustainable bond issuance across ASEAN, the PRC, Japan, and the ROK (collectively known as ASEAN+3) also experienced strong growth. By the end of June, sustainable bonds in the region had reached $868.1 billion, with annual growth of 17.4 per cent, outpacing both European and global markets. The second quarter saw longer tenors for sustainable bonds, particularly in Southeast Asia, where the size-weighted average tenor increased to 6.9 years, largely due to public sector issuances.

Fibre2Fashion News Desk (KD)