Dong Bond Market Regains Growth Momentum

11:58:30 AM | 26/6/2019

Vietnam's domestic bond market recovered in the first quarter of 2019, with an increase of 0.7% in value of the domestic currency to reach US$51.4 billion, after sliding 5.3% in the fourth quarter of 2018.

According to the latest Asia Bond Monitor Report released by the Asian Development Bank (ADB), the growth was resulted from a robust increase in treasury bonds at 0.9% in the first quarter of 2019 to US$47 billion, after a 6.1% decline in the last quarter in 2018. The growth in the government bond market also offset the 1.3% slide in the corporate bond market in the first quarter of 2019.

The report also stated that the local currency bond markets in emerging East Asia continued to expand over the first quarter of 2019, despite trade conflicts and moderating global growth.

The report showed that housing bonds and green bonds are potential areas of future growth.

“The region’s bond markets are holding firm but the risks are still to the downside,” said ADB Chief Economist Yasuyuki Sawada. “That said, we see potential in the development of housing bonds to finance growing demand for homes as countries urbanize and for green bonds to fund clean energy and other climate-friendly projects.”

At the end of March, there were US$15 trillion in local currency bonds outstanding in emerging East Asia, 2.9% more than at the end of 2018 and 14% more than at the end of March 2018. Bond issuance in the region, meanwhile, amounted to US$1.4 trillion in the first quarter, 10% higher than in the last quarter of 2018 on the back of stronger issuance of government debt.

Emerging East Asia comprises the People’s Republic of China, Hong Kong (China), Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

Government bonds accounted for 61.7% of emerging East Asia’s total local currency bond stock at US$9.3 trillion as of the end of March, a 14% increase versus end-March 2018. Meanwhile, there were US$5.8 trillion in corporate bonds outstanding, 14.2% more than a year earlier. China remained the largest bond market in terms of size in emerging East Asia, with 75.3% of the region’s total outstanding bonds. Malaysia had the largest market for sukuk, or Islamic bonds, while South Korea had the largest bond-to-gross domestic product ratio in the first quarter of this year, at 125.6%.

In a special chapter, the report noted that developing a market for housing bonds would increase access to home loans at a time of rising demand and diversify housing finance, traditionally provided by commercial banks. Provision of housing finance through the bond market would also mitigate the maturity mismatch arising between typically long-term borrowing by homeowners and short-term bank loans. Developing a housing bond market can help countries raise funds to build more housing units, meeting the increasing housing demand while also contributing to growth and development through job creation, the report said. Meanwhile, the continued development of Asia’s green bond market is helping the region finance climate mitigation and adaptation projects.

Quynh Anh