Asian bond markets rebounded in January 2017 amid broad-based rallies in local currencies. Most underlying markets advanced with Korean bond market leading the way. On the other hand, China was the only market which fell for the month. The Markit iBoxx ABF Pan-Asia Bond Index rose +1.9% on an unhedged basis, in US dollar terms, and rose +0.25% on a USD hedged basis.
During the month, Chinese bonds were down by -0.18% in USD terms. 4Q16 Gross Domestic Product (“GDP”) came in better than expected at +6.8% Year over year (“YOY”) led by better service sector growth, leaving 2016 growth at 6.7%. January manufacturing PMI slowed to 51.3 and December growth indicators were mixed: Exports improved fell -6.1% YoY while imports (+3.1%) were supported by strong commodity imports. Retail sales accelerated to +10.9% YoY while industrial production and YTD Fixed Asset Investment (“FAI”) moderated to +6% and +8.1% respectively. Consumer Price Index (“CPI”) eased to +2.1% YoY while PPI came in higher than expected at +5.5%. Finally, new loans and aggregate financing were strong, reflecting firm aggregate demand growth.
Hong Kong fixed income market edged up by +0.38% in dollar terms for the month. January PMI moderated to 49.9 while December exports (+10.1% YoY) surprised on the upside, as exports to Asian markets held firm. Finally, December CPI was unchanged at +1.2% YoY and unemployment rate stayed at 3.3%.
The Singapore fixed income market rose +3.04% in USD terms. January PMI accelerated to 51 with electronics sector index improving to 51.8. December industrial production surged by +21.3% YoY and Non-oil domestic exports came in better than expected at +9.4% YoY with electronic shipment rising +5.7%. November retail sales rose +1.1% YoY (-2.1% if excluding auto sales). Finally, December headline CPI (+0.2% YoY) rose for the first time in more than 2 years.
Korean bond market jumped by +3.89% in USD driven by a stronger won. The Bank of Korea held steady at 1.25% amid domestic political uncertainty and risk of a faster Fed hiking. 4Q16 GDP softened to +2.3% YoY. December industrial production slowed to +4.3% YoY but January exports surged to 4-year high at +11.2%. Finally, January CPI (+2% YoY) spiked to the highest since 2012.
Malaysian bonds advanced by +2.47% in aggregate. The Bank Negara Malaysia maintained its policy rate at 3%. November exports turned positive to +7.8% YoY and industrial production quickened to +6.2%. December CPI was unchanged at +1.8% YoY.
Thai bonds rose +1.85% in USD. December exports slowed to +5.6% YoY. Meanwhile, January CPI accelerated +1.55% YoY, driven by a surge in fuel prices.
Indonesian bond market rose +2.5% in dollar terms. The 10 year government bond yield declined to 7.65% as of 31 January, 2017. Bank Indonesia held interest rates at 4.75% and expected higher growth and inflation in 2017. December CPI moderated to +3.02% YoY and exports rose +15.57%. Meanwhile, the Philippine bonds was up by +2.22% in USD. 4Q16 GDP slowed to +6.6% YoY, leaving 2016 full-year growth at 6.8%. December CPI rose +2.6% YoY while November exports fell -7.5% YoY.
Source: SSGA, as of 31 January 2017.
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