COVID-19-induced uncertainty affects bond markets

The COVID-19 pandemic continues to drag on local currency bond markets in emerging East Asia, including Vietnam, as investment sentiment globally and in the region wane and containment measures limit economic activity.

COVID-19-induced uncertainty affects bond markets hinh anh 1

Vietnam’s local currency bond market posted a healthy 9.5 percent quarter-on-quarter growth in the first quarter of 2020 to reach 57.6 billion USD at the end of March. — (Photo baodauthau.vn)

According to the latest issue of the Asian Development Bank’s (ADB) Asia Bond Monitor, Vietnam’s local currency bond market posted a healthy 9.5 percent quarter-on-quarter growth in the first quarter of 2020 to reach 57.6 billion USD at the end of March.

This is mainly due to a strong growth rate of the Government bond segment with growth rate of 10.5 percent to 53.3 billion USD, accounting for 92.6 percent of the country’s total bond stock.

Corporate bonds, however, contracted 1.7 percent, marking 4.2 billion USD at the end of March given the absence of new issuance over the review period.

Vietnam is among entering East Asia countries and territories comprised of mainland China and Hong Kong, Indonesia, the Republic of Korea, Malaysia, the Philippines, Singapore and Thailand.

ADB Chief Economist Yasuyuki Sawada said governments and central banks in the region have taken significant measures to mitigate the impact of COVID-19 through fiscal stimulus packages and eased monetary policies. But more needs to be done to strengthen the region’s economies and financial markets.

“While overall investment sentiment is still down, there are signs of recovery in some economies as quarantine measures are strategically relaxed,” Sawada said.

Government bond yields trended downwards in most regional markets between 28 February and 29 May this year, while equity markets in emerging East Asia suffered losses and local currencies depreciated against the US dollar.

 

Credit spreads have widened for nearly all markets in the region as investors took a risk-averse approach, with the share of foreign holdings in most of emerging East Asia’s local currency bond markets also declining.

Risks to the global outlook remain heavily tilted to the downside, mainly due to the uncertainty brought about by the COVID-19 pandemic, including the prospect of longer periods of minimal economic activity and further waves of outbreaks. Other risk factors include trade tensions between China and the US, as well as financial volatility due to capital outflows from emerging markets.

Local currency bonds outstanding in emerging East Asia totalled 16.3 trillion USD at the end of March, up 4.2 percent from December 2019 and 14 percent higher than in March 2019. Bond issuance in the region reached 1.7 trillion USD in the first quarter of 2020, up 19.7 percent from the fourth quarter of 2019.

Emerging East Asia’s local currency bonds outstanding as a share of gross domestic product rose to 87.8 percent at the end of March.

Government bonds outstanding rose to 9.9 trillion USD at the end of March, while corporate bonds reached 6.4 trillion USD. China remains the largest bond market in emerging East Asia, accounting for 76.6 percent of the total bond stock at the end of the first quarter of 2020.

The second issue of Asia Bond Monitor this year includes five discussion boxes focused on the COVID-19 pandemic. They explore its impact on capital markets; the possibility of issuing pandemic bonds as an option to fight COVID-19; the rising attention directed to social bonds in response to the pandemic; using fintech to promote inclusive growth and pandemic resilience; and the infrastructure and policies needed for firms to obtain financing during the COVID-19 pandemic.

The report also includes a theme chapter on the link between financial architecture and innovation. It highlights the importance of a sound and efficient financial system in fostering a viable innovation environment./.VNS

 
 

Other News

.
Coronavirus: Moguls and lobbyists get millions in government aid
Coronavirus: Moguls and lobbyists get millions in government aid
BUSINESSicon  08/07/2020 

Kanye West's apparel brand, Jared Kushner's family and Donald Trump's lawyer were among the recipients.

Hanoi emphasising its investment advantages
Hanoi emphasising its investment advantages
BUSINESSicon  08/07/2020 

While Hanoi is making further improvements to call for fresh investment in development of industrial zones to pick up a new possible wave of investment shifts, the problem of how to efficiently absorb the capital must be taken into consideration.

Bank accounts of local advertisers to be drained for Facebook and Google tax arrears
Bank accounts of local advertisers to be drained for Facebook and Google tax arrears
BUSINESSicon  08/07/2020 

Dozens of thousands of local advertisers of Facebook and Google are on edge since the Law on Tax Administration has come into force on July 1.

Fashion rivals continuing to suffer in coronavirus fallout
Fashion rivals continuing to suffer in coronavirus fallout
BUSINESSicon  08/07/2020 

Thousands of dismissed labourers at suppliers in Vietnam has exacerbated the floundering performance of major garment and footwear brands across the globe like Adidas, Nike, and Zara.

Vietnam to increase rice exports to EU under EVFTA
Vietnam to increase rice exports to EU under EVFTA
BUSINESSicon  08/07/2020 

Rice quotas for Vietnam under the EVFTA are expected to push Vietnam’s rice exports up from the second half of this year, according to the Ministry of Industry and Trade (MoIT).

Higher labor productivity: pay rise
Higher labor productivity: pay rise
BUSINESSicon  08/07/2020 

Business owners should be authorized to decide whether minimum wages are raised or not in the year that follows because it is only they who are able to determine whether labor productivity

Vietnamese enterprises: The evidence of inefficiency
Vietnamese enterprises: The evidence of inefficiency
BUSINESSicon  08/07/2020 

While the 2020 White Book on Vietnamese businesses offers only data which can be used for reference, this report points out that the majority of Vietnamese enterprises are very small, and their business efficiency seems to be also extremely low.

Car sales in Vietnam rocket after registration fee cut
Car sales in Vietnam rocket after registration fee cut
BUSINESSicon  08/07/2020 

After the Government’s move to lower car registration fees by half took effect more than a week ago, the domestic car market has picked up.

State budget revenue reaches seven-year record low
State budget revenue reaches seven-year record low
BUSINESSicon  08/07/2020 

The total State budget revenue was estimated to be at VND668,700 billion, equaling 44.2% of the anticipated amount by the end of June, marking a 10.5% drop over the same period last year and the lowest levels since 2013.

Car sales rocket after registration fee cut
Car sales rocket after registration fee cut
BUSINESSicon  08/07/2020 

After the Government’s move to lower car registration fees by half took effect more than a week ago, the domestic car market has picked up.

EuroCham stresses importance of stimulus packages in Vietnam’s post-pandemic recovery
EuroCham stresses importance of stimulus packages in Vietnam’s post-pandemic recovery
BUSINESSicon  08/07/2020 

State financial support for companies hit hard by the Covid-19 pandemic, regardless of the level they are yet, and subject to the Government’s consideration in terms of budget range and macroeconomic stability, 

Private sector involvement proposed in Chu Lai airport project
Private sector involvement proposed in Chu Lai airport project
BUSINESSicon  07/07/2020 

The authority of Quang Nam Province has proposed that private investors be allowed to participate in the construction, management and operation of Chu Lai airport, similar to the investment model adopted for Van Don airport in Quang Ninh Province.

Fitch Ratings says Vietnam outperforms among Asia’s frontier sovereigns
Fitch Ratings says Vietnam outperforms among Asia’s frontier sovereigns
BUSINESSicon  07/07/2020 

According to Fitch Ratings, Vietnam is positioned to stand out among Asia’s frontier and emerging markets this year as a result of its economic resilience and success in bringing the novel coronavirus pandemic under control.

Vietnam’s bond market posts highest growth in emerging East Asia: ADB
Vietnam’s bond market posts highest growth in emerging East Asia: ADB
BUSINESSicon  07/07/2020 

The local currency (LCY) bond market in Vietnam posted the highest growth in the emerging East Asia region, as authorities took fiscal and monetary policy actions to mitigate the economic fallout from the coronavirus pandemic.

China is largest plywood investor in Vietnam
China is largest plywood investor in Vietnam
BUSINESSicon  07/07/2020 

China has invested in 29 plywood projects worth over US$150 million in Vietnam, becoming the country’s largest plywood investor, according to Ngo Sy Hoai, vice chairman of the Vietnam Timber and Forest Products Association.

Customs authority discovers multiple cases of origin fraud
Customs authority discovers multiple cases of origin fraud
BUSINESSicon  07/07/2020 

Country of origin fraud cases, wherein Chinese products bear Made-in-Vietnam labels, are on the rise, with Vietnam’s customs authority recently inspecting 76 cases

Thai firm buys two wind power farms in Vietnam
Thai firm buys two wind power farms in Vietnam
BUSINESSicon  07/07/2020 

The move aims to take advantage of low interest rates to build projects with a quick return on investment.

FIEs displeased with government demand to license internal websites
FIEs displeased with government demand to license internal websites
BUSINESSicon  07/07/2020 

The new regulations of the MIC may affect the policies and assets of private businesses and foreign-invested enterprises in Vietnam.

Amended law alters funding landscape
Amended law alters funding landscape
BUSINESSicon  07/07/2020 

The Vietnamese National Assembly has adopted the new Law on Investment, with new rules in favour of foreign investment, including from the US, which is expected to surge in Vietnam in the time to come.

New investment wave starts despite COVID-19
New investment wave starts despite COVID-19
BUSINESSicon  07/07/2020 

The new wave of foreign investment triggered by COVID-19 and US-China trade tensions is becoming more visible as outstanding overseas ventures are expanded.

 
 
 
Leave your comment on an article

OR QUICK LOGIN