ISLAMABAD: 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, said the Asian Development Bank's (ADB) latest Asia Bond Monitor.
By the end of 2012, emerging East Asia had $6.5 trillion in outstanding local currency bonds versus $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.
According to the report, 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.
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.
Investment is increasingly coming from overseas, with foreign ownership in most emerging East Asia local currency bond markets increasing in the second half of 2012.
Governments in emerging East Asia are increasingly opting to sell onger-dated bonds - another sign of strong market confidence in the economies of the region - which is making them more resilient to possible volatile capital flows, the report adds.
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