Flows Into Asia's Bond Markets Raise Risk

Jakarta (Antara Bali) - Emerging East Asia's local currency bond markets continued to expand in 2012, signaling ongoing investor interest in the region's fast-growing economies but also raising the risk of asset price bubbles, a press release from the Asian Development Bank (ADB) received here on Tuesday said.

"Emerging East Asia is much more resilient than it used to be but governments still need to be careful that the surge in capital inflows doesn¿t fuel excessive rises in asset prices and that they are prepared for a possible reversal in the flows when the economies of the US and Europe pick up again," said Thiam Hee Ng, Senior Economist in ADB's Office of Regional Economic Integration.

By the end of 2012, emerging East Asia had $6.5 trillion in outstanding local currency bonds versus US$5.7 trillion at the end of 2011. That marked a quarterly increase of 3.0 percent and an annual increase of 12.1 percent in local currency terms. The corporate markets, though smaller than the government bond markets, drove the increase, growing 6.2 percent on quarter and 18.6 percent on year to US$2.3 trillion.

Emerging East Asia is defined as the People¿s Republic of China (PRC); Hong Kong, China; Indonesia; the Republic of Korea; Malaysia; the Philippines; Singapore; Thailand; and Vietnam. (*/M038)