Global Market

Global Market

Asian stock increased in the last two weeks excluding Japan, of which the Nikkei declined by 2.85% in continuous three weeks, mainly due to the weak economic reports from Japan and the Bank of Japan’s decision to keep its monetary policy unchanged. This overall growth should be attributed to the boosting measures taken by governments. China accelerated approval of quotas to QFII to boost the market. The Ministry of Finance in India lowered the withholding tax on overseas borrowings to encourage raising funds abroad. South Korea planned to cut its financial deficit next year to the smallest in six years to improve fiscal health. Moreover, investors have gotten less risk-averse as the European sovereign-debt situation has become less volatile and the U.S. Federal Reserve has announced a third round of bond-buying stimulus.

Yield Curve

Most of Asian countries’ government bonds have a high yield curve. For example, the yield curve of Chinese government bonds below is over 1 per cent higher than that of U.S. Treasury. This feature mirrors the worrying credit environment in Asia. However, the credit environment will be and is being better, which will be explained more later.

Economic Data

In the past two weeks, many Asian countries disclosed quite favorable economic data. For example, CPI and Industrial production of Singapore increased by 4% and 2.5% year-to-year respectively while those of Korea increased 1.2% and 0.2%. Retail sales of Hong Kong increased 3.5% in value and 1.3% in volume. Of course there were negative figures, especially in Japan, of which the national CPI decreased by 0.3%, industrial production 0.8%, large retailers’ sales 4.4% and the unemployment rate increased by 4.3%.

Debt Market

Seven issuers tapped the debt capital markets the two weeks for $3.93 billion. The biggest deal was a $1 billion two-tranche trade for Hyundai Capital America, $500 million for three-year bond and a $500 million for five-year bond.

In response to India’s new tax rules, NTPC issued dollar-denominated 10-year bonds with a coupon of 4.75%, raising $500 million. Indian Railway Finance Corporation raised $300 million through dollar-denominated 5-year bonds with a coupon of 3.417%.

China Resources Cement and BOC Aviation made their debut in the dollar bond market, raising $400 million and $500 million. There was one high-yield bond cancel from China Hongqiao, which was the second time that Hongqiao had called off its bond issuance.

The trade volume went back normal from the week beginning September 10 when corporate and banks rushed to issue new bonds, achieving a record of $6.8 billion. All trades above generated times the amount of demand. More importantly, more long-term institutional