HANOI, March 19 (Xinhua) -- Vietnam was rated the fastest growing bond market in emerging East Asia in 2012, largely due to the rapid expansion in the country's government bond market, according to the Asian Development Bank's (ADB) latest Asia Bond Monitor.
Specifically the local currency bond market of Vietnam in the fourth quarter experienced the most rapid growth in the region, expanding 42.7 percent to 25 billion U.S. dollars year on year and up by 17.6 percent from the previous quarter.
The government bond market was up 54.6 percent year on year to 24 billion dollars, mainly due to an increase of 71.5 percent in the issuance of treasury bills and bonds.
The corporate bond market, however, contracted 47.6 percent year on year to 1 billion dollars, continuing a steady decline in place since March 2011.
According to ADB, 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.
Thiam Hee Ng, Senior Economist in ADB's Office of Regional Economic Integration, said that 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 U.S. and Europe pick up again.
By the end of 2012, emerging East Asia had 6.5 trillion U.S. dollars in outstanding local currency bonds versus 5.7 trillion dollars at the end of 2011. That marked a quarterly increase of 3 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 2.3 trillion dollars.
Emerging East Asia is defined as the People's Republic of China (PRC); Chinese Hong Kong; Indonesia; the Republic of Korea; Malaysia; the Philippines; Singapore; Thailand; and Vietnam.
Investors have been putting their money to work in emerging East Asia since the early 1990s, but the flows have picked up pace in recent years because of low interest rates and slow or negative economic growth in developed economies while emerging East Asia has enjoyed high growth rates and appreciating currencies, said the report.