THE PHILIPPINE bond market logged the fastest quarter-on-quarter growth in emerging East Asia in the first three months of the year on increased government borrowings to fund its deficit and pandemic response, the Asian Development Bank (ADB) said on Friday.  

The June issue of the ADB’s Asia Bond Monitor showed the country’s bond market recorded the fastest expansion in the subregion, which is composed of the Philippines, China, Hong Kong, Indonesia, Malaysia, Singapore, South Korea, Thailand and Vietnam. 

Outstanding bonds grew by 6.5% to $188 billion in the first quarter from $178 billion in the fourth quarter of 2020. This was the fastest rate in the region, which was followed by Indonesia’s 6.2%. 

“Quarterly growth accelerated from 5.3% quarter on quarter in the fourth quarter of 2020, driven entirely by the government segment as the corporate segment saw contraction during the quarter,” the ADB said.  

Meanwhile, the local bond market expanded by 28.4% from the $140 billion recorded the first quarter of 2020. This was the second-fastest print in the region after Indonesia’s 36%. 

Broken down, government bonds made up 82.7% of the total issuances in the first three months of 2021 while corporate bonds accounted for the remaining 17.3%. 

ADB data showed outstanding government bonds reached $155 billion as of March, growing by 8.4% from the $145 billion seen in last three months of 2020. It also climbed by 36.5% from the $109 billion a year earlier.  

“Treasury bills and Treasury bonds primarily drove the increase, as the government continued to heavily borrow from the local market for its COVID-19 (coronavirus disease 2019) relief efforts and to support economic recovery,” the multilateral lender said. 

Meanwhile, outstanding corporate issuances were at $33 billion in the first quarter, slipping by 2% from the $34 billion logged in the previous three-month period.  

“The decline can be attributed to the maturation of bonds offsetting the new issuances during the quarter,” ADB said. 

Year on year, however, corporate bonds inched up by 0.01% from the $31 billion seen in the first quarter of 2020. 

Among industries, the banking industry held the largest share of outstanding corporate bonds at 41.8% of the total, followed by the property sector with 23.8%. 

However, even as it expanded faster than its peers, the Philippine bond market was the second smallest in emerging East Asia in the first quarter, beating only Vietnam’s $71-billion market. 

In contrast, the biggest issuers as of March were China ($15.799 trillion), South Korea ($2.382 trillion), and Thailand ($3443 billion). 

The local currency bond market in emerging East Asia continued to grow in the first quarter to reach $20.3 trillion as of March. This was higher by 2.2% quarter-on-quarter and by 15.9% year-on-year. 

“[The] overall growth of the bond market moderated somewhat in Q1 2021 as governments sought to balance fiscal policy and corporates weighed uncertainty over the economic recovery,” the ADB said. 

“Investor sentiment remained subdued amid looming uncertainties brought about by the COVID-19 pandemic and inflation fears in the United States. This led 

to volatilities in financial markets, especially in March… The COVID-19 pandemic remains the largest downside risk… Another potential risk is the possibility of tightening liquidity conditions globally, specifically that the Federal Reserve might tighten US monetary policy in response to growing inflationary pressure,” it added. — LWTN 

ASIA UNITED Bank Corp. (AUB) targets to grow its net profit by 30% to P4 billion this year on hopes that improving consumer confidence will boost its lending business, it said in a statement on Friday. 

AUB’s net income dropped 38% to P736 million in the first quarter from a year earlier as it boosted its loan loss provisions. In 2020, the bank’s net profit was down by 32% to P3 billion from P4.4 billion in 2019. 

“2021 will definitely be a better year than 2020 as we expect the vaccine rollouts by the government and the private sector to improve consumer confidence and lead to increased economic activity. These, in turn, will boost our commercial and consumer lending business, which remain stable,” AUB President Manuel A. Gomez was quoted as saying. 

“We anticipate the new wave of loan bookings as the economy opens up. We are therefore cautiously optimistic that as the economy normalizes, the asset quality compared to 2020 will significantly improve, not only for AUB but for the entire banking industry,” he said at the bank’s virtual annual stockholders’ meeting on Friday. 

Mr. Gomez said the bank will continue to ramp up spending for its IT infrastructure, which was also its goal in the previous year. 

“That will remain as IT will always be essential in order for us to keep up with the changing environment,” he said.  

Even as he expects economic conditions to improve due to the gradual return of business activities, Mr. Gomez said the banking industry needs to continue to guard against risks that may arise due to the pandemic and the impending tightening of monetary policy measures. 

“We must also be prepared for tightening regulations and increasing credit costs as the Bangko Sentral [ng Pilipinas] tries to stave off inflationary pressures and significant stress on the banking system,” Mr. Gomez said. 

“We have yet to feel the full effects of the pandemic to personal incomes and business viability. We must still brace ourselves for some pockets of turbulence,” he added. 

AUB Chairman and Chief Executive Officer Abraham T. Co, for his part, said the bank will likely mix working from home and from the office as needed moving forward. 

“We have learned a lot how to work differently. Some people work better at home, some people don’t,” Mr. Co said. 

AUB’s shares closed at P43.80 apiece on Friday, down by 20 centavos or 0.45% from the previous day. — LWTN