Jeweller gets exclusive licence

Gold bars issued by Saigon Jewelry Company Ltd (SJC)will be selected as the national gold brand upon satisfying some final requirements, State Bank of Viet Nam Governor Nguyen Van Binh told the National Assembly last week.

The designation will allow SJC to stamp gold bars with the imprimatur of the State Bank, Binh said, giving SJC an exclusive licence to produce gold bars on behalf of the State.

Binh's announcement, however, has raised concerns that the central bank is essentially granting SJC a highly lucrative monopoly over the nation's gold market – a move which will drive many other gold producers entirely out of the market.

Binh told lawmakers, however, that SJC gold bars already accounted for 90 per cent of the domestic market and their quality had been widely recognised both domestically and internationally. Therefore, the designation of SJC gold bars as the national brand was appropriate and could bring many benefits to the national economy, he said.

A monopoly on gold bar trading would enable the State to more effectively control the local market, Binh said. The granting of an exclusive monopoly would help the State cut production costs, monitor the quality of gold bullion and control better gold bar inventories, as well as enable it to intervene more readily when the market becomes overheated.

In practice, gold bar production was already problematic for several enterprises since the central bank and the Ministry of Industry and Trade have tightly controlled gold imports in an effort to control an overheated domestic market on which gold prices have been outstripping already soaring global prices. This gap has created favourable conditions for gold smugglers to penetrate the market, with impacts on foreign exchange rates as well as gold prices. The central bank also vows that it would continue to create favourable conditions for other famous gold producers, including Bao Tin Minh Chau, Sacombank Jewelry, Agribank Jewelry, and Phu Nhuan Jewelry, to process State Bank-branded bullion, utilising their existing technology and preventing SJC from becoming overwhelmed by demand.

While agreeing that the State Bank needed to closely control gold trading, Phu Nhuan Jewelry Joint Stock Co general director Cao Thi Ngoc Dung said that the central bank should avoid granting a powerful monopoly to a single enterprise.

Agribank Gold chairman Nguyen Thanh Truc also said SJC should only be granted such a monopoly if the company were operated on a not-for-profit basis.

He noted that it would be easy for other gold producers to make gold bars at the SJC standard with additional processing estimated to cost about VND30,000 (US$1.4) per tael. (One tael of gold is equivalent to 1.2 ounces.)

Some gold traders and investors, meanwhile, have voiced concerns that gold bullion not bearing the SJC brand could not be traded once the exclusive licence is granted to SJC.

Senior economist Vu Dinh Anh urged individual investors holding gold with brands other than SJC not to be panic, assuring them that the State Bank would protect the rights and interests of citizens, and last week, the State Bank issued a similar reassurance that gold bullion already on the market could continue to be traded even when stricter regulations took effect next year. All of the changes in regulation of the gold market have been necessitated by Vietnamese citizens inveterate habit of hoarding gold.

By last June, Viet Nam's total gold holdings were equivalent to 20-45 per cent of national GDP, said Le Xuan Nghia, deputy head of the National Financial Supervisory Committee. Most of the holdings were held by private individuals, since central bank reserves were insignificant, he added.

Under a decree on administration of the gold market, which has been in the drafting stage for almost a year, new traders in gold bullion, jewellery and ornaments would need to apply for a licence from the State Bank, while existing producers and traders in gold jewelry would need to re-register with the business licensing authority and then obtain a quality certificate from the central bank within 12 months of the decree taking effect.

Gold bullion traders would be required to go through the same process but within six months of the decree taking effect.

Only enterprises with at least VND500 billion ($23.58 million) in charter capital, and which hold at least a 25-per-cent share of the domestic gold bullion market for the previous three years, would be permitted to continue producing gold bars. The State Bank would set a production quota for each firm.

If approved, the new decree would replace Decree No 174/1999/ND-CP issued back in 1999. The pending decree, along with the State Bank's effort to encourage investors to deposit gold holdings and the issuance of Government Decree No 95 – which took effect last month and which imposes higher penalties on administrative violations relating to foreign currency and gold trading – is expected to establish a healthier and more transparent market on the basis of protecting both national and individual interests.

Gems group joins $1bil club

Doji Gems and Gold Group has been ranked third in the top 500 biggest enterprises in Viet Nam by Viet Nam Report Company and online newspaper VietNamNet, which also named 30 enterprises having joined the US$1 billion club.

Overcoming the challenges of the global economic crisis, the group posted a revenue of $251 million in 2008, $533 million in 2009 and $1 billion last year. The group is estimated to reach a revenue of $1.4 billion by the year's end.

This is the fifth consecutive year the Viet Nam Report Company and VietNamNet released the 500 ranking.

Tyre firm to build plant

The Japanese group Bridgestone has unveiled its plan to build a US$460 million plant in the Dinh Vu industrial zone in northern Hai Phong City.

The plant is expected to be operational in the first half of 2014 and reach full production of around 24,700 tyres a day in 2016. It will produce tyres for export to the European, North American and Japanese markets after the increased capacity at Bridgestone's plants in Thailand and Indonesia can't keep up with the market.

Retail gas prices on the up

The local retail prices of gas yesterday increased by VND5,000 (US$0.18) to VND351,000 ($122.85) per 12kg canister. The price rise was attributable to gas for December delivery on the global market increased $15 per tonne compared with November.

Farms, rural areas targeted to receive loans

Investing in agriculture and rural areas will be among the leading objectives of the banking sector next year, industry insiders say.

The Agriculture and Rural Development Joint Stock Bank (Agribank), specifically mandated with this task, has already been at the forefront of this trend.

In the first 10 months of this year, the bank carried out several measures to push up its lending to production and business areas in the rural sector, one of which was to reduce lending rates by between 2 and 4 per cent per year.

Loans injected by the bank into agriculture and rural areas thus rose by 13 per cent compared to the same period last year to over VND28.58 trillion.

Nguyen Ngoc Bao, chairman of Agribank, said the bank also set itself the target of pushing up its credit growth by 5 per cent from now until next year's first quarter, with most loans to be pumped into the agriculture and rural sector.

Agribank also aims to raise its outstanding loans ratio in agriculture and rural areas from current 67 per cent to 80 per cent in 2012.

In addition to Agribank, several other banks have been taking steps to provide more credit to the agriculture sector and rural areas, according to banking sector insiders.

Offering lower interest rates is still a common method used by commercial banks to increase lending to the rural areas.

Interest rates on loans to the rural areas were typically between 1 or 2 per cent lower than those given to businesses elsewhere, experts said.

The Lien Viet Post Commercial Bank has to date lent over VND4 trillion to the agriculture and rural sector, accounting for up to 40 per cent of its total outstanding loans.

Its chairman, Nguyen Duc Huong, said the bank's rural lending was carried out based on a "the right hand gives loans but the left hand get back the money"method.

"We act as a middleman between farmers and enterprises. We give loans to farmers but we get back the money from enterprises who buy products from borrowers (farmers)," Huong said, adding, "rural lending carries low risk because loans are usually small."

In the current context of a tight monetary policy, the rural sector was a rather safe and stable investment channel, said Le Duc Tho, deputy general director of the Viet Nam Joint Stock Bank for Industry and Commerce (Vietinbank).

According to experts, banks' efforts to push up rural lending was also influenced by the central bank's credit policy of giving top priority to the agriculture and rural areas in 2012.

The central bank has called on all banks to focus investments in the rural sector, saying it is a safe and efficient ploy given the current economic difficulties.

It has asked all credit institutions, especially the big ones, to ensure an outstanding loan ratio for the rural sector of at least 20 per cent in 2012. Agribank, as the leading bank in the rural lending programme, must achieve the rate of 80 per cent.

If a bank does not have a convenient network to boost lending for the agriculture and rural sector, it should entrust Agribank to do it, the central bank has said.

To enable commercial banks to cut interest rates for loans given to the rural sector, the central bank has asked credit institutions to prepare the capital needed to serve this objective, and seek ways to reduce operating expenses.

For its part, the central bank will also issue policies to support banks that have a high outstanding loan ratio for the rural sector.

In particular, the central bank is likely give deserving banks a preferential compulsory reserves ratio, or set aside funds for refinancing these credit institutions.

Made-in-Vietnam products popular with local customers  

Made-in-Vietnam products have of late improved in style, design, quality and pricing, attracting more and more local customers.  

A shoe shop on Cach Mang Thang Tam Street in Ho Chi Minh City is attracting hoards of local customers as it has on display a huge variety of vulcanized shoes, indoor slippers and sandals, all made by the An Lac Footwear Company.

“Previously I used to buy Chinese made running shoes but they were uncomfortable, while An Lac walking shoes are comfortable and light”, said a customer.

According to Mr. Le Xuan Cuong, Deputy Director of An Lac Footwear Company, modern production technologies have been applied in making shoes, using high-quality material and accessories. An Lac also has more than 20 years experience in manufacturing export products for leading brands of the US, Denmark, France, Spain and Mexico.

An Lac products meet the US “Consumer Product Safety Improvement Act” (CPSIA) standard and the EU guidance standard, REACH (Registration, Evaluation and Authorization of Chemicals). The company also refrains from using any material harmful to human health.

Dai Dong Tien Corporation has been very popular for its plastic household goods of high quality, diversified designs and competitive prices.

The company was awarded the title “Most famous plastic brand” and the “Vietnam High Quality Products” award from 1997-2010.

The enterprise has been successful in applying Nano-Silver technology (anti-bacteria technology) in manufacturing eco friendly plastic products.

According to the owner Huynh Quang Huyen, the Phu Vinh Hung plastic shop in Hoc Mon District is selling the ‘Dai Dong Tien’ brand to customers who are no longer lured by Chinese and Thai plastic products.

To date, there are more than 10,000 retail shops throughout the country. Plastic products are exported to over 30 countries, including top markets such as China, Laos, Cambodia and Thailand, said Director Tran Chi Cuong.

Founded in April 1980, Binh Dong Electro Mechanical Private Factory (Bifan Company) is one of the leading fan manufacturers in Vietnam.

The enterprise has applied modern technology and presented the latest designs to consumers. Bifan products are not only sold nationwide, but also exported to the US, Indonesia, Malaysia, Cambodia, Laos, China and Thailand.

The company also produces spare part components to install in products and exports then to foreign markets.

French fully back VN climate action

Viet Nam's Finance Ministry and the French Development Agency (AFD) signed a second loan agreement worth 20 million euro (US$27 million) yesterday to support the implementation of the National Target Programme on Climate Change.

Present at the ceremony was Director of the ministry's Department for Debt Management and External Finance Nguyen Thanh Do, AFD Director Jean Marc Gravellini and French Ambassador Jean-Francois Girault.

The preferential 20-year loan will have a grace period of 7 years and an interest rate 1.75 per cent less than the floating euro rate.

The AFD had focused its efforts in supporting Viet Nam in developing renewable energy and bio-fuel and energy efficiency related to construction and production, Gravellini said, adding that there would be yearly indexes to evaluate the efficiency of State spending.

Do noted that the AFD and the Japan International Co-operation Agency (JICA) first recommended a fund towards the climate change programme last year, facilitating other donors to join including the World Bank, the Australian Agency for International Development and Korea's Eximbank.

Last year, Viet Nam received a 10-billion-yen ($129 million) loan from the JICA and 20 million euro ($27 million) from the AFD as a first loan in support of its programme.

The AFD has operated in Viet Nam for the last 17 years, committing capital of around 1.2 billion euro ($1.6 billion) in total.

Viet Nam first approved its target programme in response to climate change in 2008.

Vietnam opens products center in Dubai  

Sao Khue Investment and Trade Promotion Organization recently signed an agreement with Rice International Conference and Exhibition (RICE) - Dubai 2011, to establish a center to market and distribute made-in-Vietnam products in Dubai.

The center will be supported by the Ministry of Industry and Trade, the Ministry of Agriculture and Rural Development, and 30 rice and aqua product companies. It will function as a market research and marketing center, and a base depot for Vietnamese products in the future.

The United Arab Emirates is the gateway to the Middle East and Northern African markets. This is the largest rice re-exporting market in the world with a trading value of more than US$2 billion per year, accounting for 93 percent of the total re-export of global rice.

Goods supply to meet Tet demand
 
While essential goods supply is expected to meet domestic demand over the 2012 Lunar New Year, food prices might increase due to the impact of natural disasters, according to the Domestic Market Watch Team.

Nguyen Tien Thoa, a team member and head of the Ministry of Finance's Pricing Management Department, said that the domestic demand on consumption was expected to increase by 20-22 per cent over the Christmas, New Year and Lunar New Year periods.

Prices were also set to rise due to huge amounts of money, consisting of salaries, bonuses and saving, available for spending on consumer goods and services during the holidays, Thoa said.

However, Do Thi Tuyet Mai, a representative from the Ministry of Agriculture and Rural Development, said that 41 million tonnes of paddy would be harvested this year alongside the export of 7 million tonnes of rice and the sating of domestic demand.

Regarding meat, Mai said, by the end of this month, pig herds had increased by 4.4 per cent, solidifying supply, while there would also be enough beef for the Tet festival.

Phan Sinh, deputy head of the Import Export Department at the General Department of Taxation, said that pork exports via border gates would not affect the domestic market, occupying only 0.03 per cent of consumption.

Mai noted that good weather had created favourable conditions for the increased planting of vegetables, resulting in reduced prices.

Thoa said that the Ministry of Finance had asked cities and provinces to address difficulties associated with tax, customs and treasury procedures while promoting market and price controls.

The ministry also delayed price increases based on key goods such as electricity, petrol and coal, to maintain input cost stability, he added.

Additional market stabilisation programmes would be developed under State direction to diversify goods supply on the domestic market.

Because many enterprises in HCM City and Ha Noi have got long-term business contracts, it is necessary to retain and work on such programmes, especially in the periods before and after Tet.

Region discusses ‘green' growth

The nation will begin implementing a new national strategy for green growth in June 2012, said a technical specialist with the Ministry of Planning and Investment's Department for Science, Education, Natural Resources and the Environment, Le Duc Chung.

The new strategy was part of a long-term effort to embrace sustainability and stray away from an economic growth model driven largely by overexploitation of natural resources, Chung said yesterday at a conference held to discuss ways to promote a green economy in the Greater Mekong Sub-region.

The two-day conference attracted government and civil society representatives from six countries in the region.

Experts at the conference estimated that 80 per cent of the region's population of nearly 400 million depended on the capacity of natural systems to sustain key ecosystems such as clean water, food and fibres.

Speaking at the opening ceremony, Deputy Minister of Natural Resources and Environment Tran Hong Ha said depletion of natural resources, rise in pollution and destruction of important ecosystems in the Greater Mekong Sub-region had reached critical levels.

"Along with the increase in the negative impacts caused by climate change, the region is facing more challenges than ever in combating poverty and promoting environmental protection as people's livelihoods are heavily dependent on natural capital," Ha said.

Under a draft national strategy for green growth during 2011-20, with vision until 2050, the country would focus on three major targets: reducing the amount of greenhouse emissions, greening production, and encouraging green consumer practices, he said.

Specifically, Viet Nam would strive to reduce greenhouse gas emissions by 10-20 per cent during 2011-20 and 35-45 per cent during 2020-30. By 2020, total revenues from high-tech and environmental-friendly sectors would account for 42-45 per cent of GDP, to rise to 80 per cent by 2030.

Dr. Nguyen Van Tai, director general of the Institute of Strategy and Policy on Natural Resources and Environment, said the region's countries must remove policy barriers and subsidy mechanisms that are harmful to the environment and set up a legal environment that creates favourable conditions for promoting production of environmental-friendly goods and services.

"We take much of the components and processes that our ecosystems provide for granted in terms of what they contribute to the wellbeing of people, society and the economy," Tai said.

The two-day conference will propose a "Roadmap to Rio" that will present a comprehensive green growth vision for the region at the UN conference on sustainable development in Brazil scheduled for June 2012.

The Greater Mekong Sub-region includes Cambodia, China, Laos, Myanmar, Thailand and Viet Nam.

Floods hit Delta seafood sector
 
The supply of seafood materials for processing has declined significantly as a result of continued flooding in the delta in the last few months in the Cuu Long (Mekong) Delta.

In Kien Giang Province, for example, the volume of rainfall and floods has changed the environment around shrimp-farming ponds, and as a result, many shrimp have died.

Nguyen Danh Hien, director of Minh Phu Aquaculture Company, said he had expected his 100ha-farm would yield 1,500 tonnes of shrimp, as in previous farming crops, but the actual yield this year was only 500 tonnes.

He said flood waters had dissolved the salinity in ponds, causing shrimp to die.

Other farms in the province have had a low yield as well.

The price of shrimp used as raw materials for seafood processing has risen to VND270,000, or about VND14,000 over the last crop.

Tran Chi Vien, deputy director of Kien Giang Province's Department of Agriculture and Rural Development, said the department had urged aquaculture farmers to expand shrimp farming by 200ha to meet the current shortage.

In An Giang Province, the supply of tra (pangasius) fish is also insufficient.

The total area of tra fish farming ponds has reduced of 500ha compared with last year, according to Pham Thi Hoa, deputy director of An Giang Province's Department of Agriculture and Rural Development.

However, the companies affected most are small- and medium-sized ones.

Big processing companies have their own aquaculture farms, so they are able to control supply. Some of the aquaculture farmers were even supplying seafood for them via contracts signed at the beginning of the current crop.

According to Dong Thap Province's Department of Fisheries, many big processors in the province have a sufficient supply of seafood for production.

Farms in the province have harvested 3,090,130 tonnes of tra fish from 812ha. However, the department predicts a drop in yield for the coming crop because of a shortage of fish fries, which was caused by the impact of floods.

Handicraft makers eye local market
 
Many handicraft producers have decided to shift their focus to the domestic market, such as local resorts, restaurants and their own retail outlets, as they face sinking orders from overseas markets and higher production costs.

Nguyen Hoang Tan, director of Anh Tan Cuong Joint Stock Co said his company had revised its business targets by slashing export targets to 60 per cent from the 90 per cent it enjoyed in previous years and raising local consumption targets accordingly.

To exploit the local market, the company has opened a showroom in HCM City to introduce its trademark.

"The showroom helped our company more easily approach the resort and hotel sector which has been thriving these days," Tan said.

Gia Long Fine Arts Joint Stock Co director Tran Viet Tien said his company had to hire 30 seasonal workers to meet its deadline to provide tens of thousands of products to Metro and other domestic businesses late this year.

While export markets had not shown any signs of improvement, these orders showed the potential to tap into more business opportunities in the domestic market, he said, adding that the company was completing the necessary procedures to enlarge its factory to meet increasing local demand.

Supplying handicraft products to the local market could even generate more profits and be easier than exporting as we could enjoy more flexible methods of payment and delivery, said Director of Saigon Palm Co Le Phuc Thinh.

For example, a large order to supply a 60 to 70 room resort with tables and decorative items such as picture frames could far outweigh an export order, he said.

Tan agreed, saying that handicraft producers would surely earn a higher profit if they sold their products to local resorts and hotels.

However, the enterprise itself had to invest a significant amount of capital to develop new products, open showrooms and focus on customer care, he said.

Dang Quoc Hung, deputy director of the HCM City Handicraft and Wood Industry Association (Hawa), said enterprises which used to rely on export markets had to invest to meet the new situation because the local market was far different from export markets.

Export enterprises only needed production workers and warehouse staff while supplying products to the local market required enterprises to employ more personnel for marketing, design, delivery and warranty services, he said.

Rental costs for retail outlets and production areas was also problematic for handicraft enterprises as most of them were small – and medium-sized with insufficient financial capacities, he said.

Techcombank supports SMEs

Techcombank signed an agreement on Tuesday to use a long-term loan from the German Investment and Development Company to assist small and medium-sized businesses in Viet Nam.

The loan will help the bank satisfy enterprises' demand for capital. SMEs account for 96 per cent of enterprises in Viet Nam, contributing to 40 per cent of the Gross Domestic Product, according to the Viet Nam Association for Small and Medium-sized Businesses.

Ha Long Shipbuilding hands over ship

The Ha Long Shipbuilding Industry Co (Viet Nam Shipbuilding Industry Corporation) yesterday handed over a 23,000-tonne container ship to Vinashin Ocean Shipping Co (Viet Nam National Shipping Lines) in the northern province of Quang Ninh's Ha Long City.

The ship, named New Vision, can be loaded with up to 1730 TEU. It is 148m long, 25m wide and 13.5m high and capable of moving at 19.70 nautical miles per hour.

New Vision is the largest container ship of its kind built in Viet Nam.

Quang Tri revokes specialised port

Quang Tri People's Committee has announced the cancellation of a plan by the Viet Nam Sun Paper Co to build a paper mill and a specialised port.

The plan was scrapped as the Sun Paper company failed to complete administrative procedures for the project.

Automaker sets sights on VN market

Taiwan-based automaker Luxgen plans to develop an electrically-powered automobile for the Vietnamese market in 2014, according to its senior vice president.

Vincent Tsao said Luxgen would target reaching 1 per cent of the luxury auto market segment, citing the economic growth rate of Viet Nam and its promising potential.

Viet Nam is the first market Luxgen has targeted in the Asian region.

The company, which has opened its third showroom in HCM City, plans to develop its distribution channels and open another showroom in Hai Phong next year. Showrooms have also been opened in Ha Noi and Binh Duong Province.

Fiscal revamp focus of donor forum

Economic restructuring and poverty reduction would be the highlights of the year-end Consultative Group 2011 meeting of donors for Viet Nam next Tuesday, announced the World Bank yesterday.

At the press briefing for the Consultative Group 2011 (CG 2011), which is themed "Accelerating economic restructuring and poverty reduction," World Bank (WB) country director Victoria Kwakwa said that dialogues would include Viet Nam's macroeconomic context and restructuring agenda. Specifically, the dialogue would cover macroeconomic performance in 2011 and priorities for 2012 as well as an overview of the restructuring agenda and public investments, she said.

"The Vietnamese leaders have indicated a very strong focus on restructuring in the public investment, banking system and financial sectors," she said. "This is a major dialogue topic between the Government and development partners."

New poverty dynamics will also be put up for discussion.

"The meeting will talk about urbanisation, migration and the impacts of poverty. We will also discuss how the Government is responding," said Kwakwa.

In a briefing on the economic development report for Viet Nam in 2011, WB lead economist Deepak Mishra said that the current global and regional situation would bring investment opportunities back to Viet Nam.

He added that Government Resolution 11, which aims at stabilising the macro economy, controlling inflation and ensuring social security, had been effective as proven by the decreasing inflation index.

Economic growth for 2011 was estimated to reach 5.8 per cent, he said.

For the near future, reducing State budget losses and restructuring the agenda, including re-organising State-owned enterprises and restructuring the financial and banking sector, would help bring back sustainable macroeconomic development and lay a concrete foundation for Viet Nam's mid-term development, he said.

The briefing also announced the 29th Viet Nam Business Forum (VBF), which will be presided over by the WB's International Finance Corporation (IFC) and the Ministry of Planning and Investment (MPI) in Ha Noi tomorrow.

IFC regional manager for Viet Nam, Laos, Cambodia and Thailand Simon Andrews said that the forum would discuss the business climate for domestic and foreign business associations with a focus on promoting talks between the Government and businesses to improve the economic environment in order to remove operational burdens on businesses. In addition, VBF would offer responses and contribute ideas to setting up laws and policies related to businesses and intensify the comprehensive implementation of laws.

VN has fastest-growing local currency bond market: ADB
 
Viet Nam was the fastest-growing local currency bond market in the third quarter of the year, increasing 22.2 per cent year on year to US$17 billion, according to the latest Asia Bond Monitor report released by the Asian Development Bank (ADB) on Tuesday.

Of this, the corporate bond market grew by a healthy 34.7 per cent with the Government bond market increasing 21.1 per cent, the report stated.

The report assessed the bond markets of mainland China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Viet Nam.

The report stated that domestic and offshore investors were still interested in emerging East Asia's local currency bonds but the region's markets were facing increasing challenges.

Specifically, emerging East Asia's local currency markets continued to expand but at a slower rate than previously. At the end of September, the region had $5.5 trillion in outstanding bonds, 5.5 per cent more than a year earlier in local currency terms. That compared with a year-on-year growth rate of 7.6 per cent at the end of the second quarter of 2011.

The expansion in the third quarter was largely due to strong growth in the region's corporate bond market, which expanded by 15.4 per cent, while the Government bond market grew by a smaller 1.3 per cent.

"Asia's low debt levels, strong economic fundamentals and the yield pick-up compared with bonds of developed markets contributed to the attractiveness of local bonds," said Iwan J Azis, head of the ADB's Office of Regional Economic Integration.

Still, risks include growing uncertainty surrounding the European economies, which was generating volatility in global and regional markets and a flight to safe-haven investments. Furthermore, the slowdown in Asia's economic growth and the potential for abrupt capital outflows were also challenges, the report said.

The report also stated that bonds issued by local governments could become an interesting new asset class in the local markets.

Mainland China has the largest local currency bond market in emerging East Asia with $3.2 trillion in bonds outstanding at the end of September, a year-on-year increase of 3.5 per cent and a rise of 0.5 per cent in comparison with that of the end of June. Of this, the corporate bond market saw a year-on-year growth of 20 per cent, contrasted with the 0.7 per cent contraction in the government bond market.

Bond issuance in the region totalled $829 billion in the third quarter, up 7.6 per cent versus the second quarter but down 19.9 per cent year-on-year as central banks reduced sales to offset foreign exchange inflows. Corporate issuance was also down 24.4 per cent on a year-on-year basis. This decline, however, was from extraordinarily high levels in 2010.

AsianBondsOnline's latest liquidity survey of more than 100 investors showed that bid-ask spreads have widened compared with last year but turnover ratios had improved. The survey results showed that market participants wanted governments to issue more bonds to improve market liquidity.

As of the end of October, borrowers in emerging East Asia had raised $63 billion in so-called G3 bonds – or bonds denominated in US dollar, euros or Japanese yen, suggesting the region may, after all, fall short of the record $87 billion in issuance witnessed in 2010.