Most Asian bond markets rose in February 2017 with Korean bond market remaining the top performer. On the other hand, the Philippines market was the only market which fell for the month. The Markit iBoxx ABF Pan-Asia Bond Index rose +1.24% on an unhedged basis, in US dollar terms, and rose +0.48% on a USD hedged basis.
During the month, Chinese bonds climbed by +0.6% in USD terms. February manufacturing PMI accelerated to 51.6. January growth indicators were distorted by lunar new year (LNY) effect: Exports (+7.9% Year over year (“YOY”)) surprised on the upside helped by a low based one year ago. Similarly, Consumer Price Index (“CPI”) accelerated to +2.5% YoY due to LNY effect and Producer Price Index (“PPI”) increased further to +6.9% against a low base. Finally, new total social financing jumped to a record high on stronger bank loans, non-discounted bills and trust loans.
Hong Kong fixed income market advanced by +0.61% in dollar terms for the month. 4Q16 GDP (+3.1% YoY) came in better than expected due to stronger private consumption and export growth, leaving 2016 growth at +1.9%. February Purchasing Managers Index (“PMI”) moderated to 49.6. January exports fell -1.2% YoY, which may be affected by LNY effect. Finally, January CPI edged up by +1.3% YoY on higher package tours inflation around LNY and unemployment rate stayed at 3.3%.
The Singapore fixed income market rose +2.29% in USD terms. 4Q16 final Gross Domestic Product (“GDP”) was revised up to +2.9% YoY from +1.8%, boosting the 2016 year growth to +2%. February PMI eased to 50.9 with electronics sector index declining to 51.4. January industrial production slowed significantly to +2.2% YoY while Non-oil domestic exports rose +8.6% YoY with electronic shipment surging +6.1%. December retail sales moderated to +0.4% YoY (+0.3% if excluding auto sales). Finally, January headline CPI climbed by +0.6% YoY.
Korean bond market jumped by +2.93% in USD driven by a stronger won. The Bank of Korea held steady at 1.25% given internal and external uncertainly together with risk of a faster Fed hiking. February exports jumped by +20.2% YoY with notable gains in petroleum products and semiconductors. Finally, February CPI rose +1.9% YoY.
Malaysian bonds edged up by +0.24% in aggregate. 4Q16 GDP (+4.5% YoY) beat expectations, leaving 2016 annual growth at +4.2%. December exports improved further to +10.7% YoY while industrial production slowed to +4.7%. January CPI accelerated to +3.2% YoY.
Thai bonds rose +1.32% in USD. The Monetary Policy Committee kept the policy rate unchanged at 1.5%. 4Q16 GDP growth softened to +3% YoY and 2016 growth was +3.2%. January exports increased by +8.49% YoY. Meanwhile, February CPI eased +1.44% YoY.
Indonesian bond market rose +1.18% in dollar terms. The 10 year government bond yield eased to 7.54% as of 28 February, 2017. Bank Indonesia held interest rates at 4.75% and sounded confident of keeping 2017 inflation contained. 4Q16 GDP moderated to +4.94% YoY on government spending cuts, but full year growth improved marginally to +5%. January CPI jumped to +3.5% YoY due to higher administrative prices and exports surged +27.7%. In contrast, the Philippine bonds fell -1.14% in USD mainly due to a weaker peso. The Bangko Sentral ng Pilipinas (“BSP”) kept policy rate unchanged at 3%. January CPI climbed to +2.7% YoY and December exports turned positive to +4.5 YoY.
Source: SSGA, as of 28 February 2017.
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