The sustainable bond market of the member economies of the Association of Southeast Asian Nations (ASEAN), China, Japan and South Korea, collectively known as ASEAN+3, grew by 29.3% last year, outpacing the 21% growth of the global and Eurozone sustainable bond markets, according to a new report by the Asian Development Bank (ADB).

The stock of sustainable bonds in ASEAN+3 economies reached US$798.7 billion at the end of last year, accounting for about 20% of the global total, according to the latest edition of the “Asia Bond Monitor” report released on March 21.

The global and Eurozone sustainable bond markets are expected to reach $4 trillion and $1.5 trillion, respectively, by the end of 2023. Sustainable bonds, or green bonds, are bond instruments used to finance projects and programs that deliver environmental and social benefits.

“ASEAN sustainable bond issuances will account for a higher share of local currency and long-term financing in 2023, driven by public sector participation,” said ADB Chief Economist Albert Park. “Public sector participation will not only add to the supply of sustainable bonds, but also serve as a role model for the private sector and help set a long-term pricing benchmark for these bonds in the domestic market.”

ASEAN markets recorded sustainable bond issuance of US$19.1 billion last year, accounting for 7.9% of total issuance in the ASEAN+3 sustainable bond market, compared to the 2.5% share of ASEAN bond issuance in the ASEAN+3 market.

ASEAN has a higher proportion of local currency funding and longer-term funding in sustainable bond issuance, with 80.6% of sustainable bonds issued in local currency and a size-weighted average maturity of 14.7 years. This is superior to the respective levels of 74.3% and 6.2 years in ASEAN+3, as well as 88.9% and 8.8 years in the Eurozone.

Financial conditions in emerging East Asia improve slightly between December 1, 2023 and February 29, 2024, as the US Federal Reserve is expected to ease monetary policy, while inflation remains moderate and most economies in the region experience stable growth.

Stock markets rose in six of the region’s nine economies, with net foreign inflows totaling $17.4 billion. Emerging East Asia comprises the ASEAN member economies, China, Hong Kong (China), and South Korea.

Emerging East Asia’s local currency bond market expanded 2.5% in the fourth quarter of 2023 to $25.2 trillion. Total issuance fell 4.8% from the previous quarter as most governments met their funding requirements in previous quarters, while China saw a decline in corporate borrowing amid a weaker economic outlook.

Vietnam’s local currency bond market contracted 0.4% QoQ due to a large volume of state-owned bank notes maturing. A total of VND360.3 trillion ($14.8 billion) of state-owned bank notes matured in the fourth quarter of 2023, while the State Bank of Vietnam (SBV) stopped issuing notes in November last year.

Government bond outstanding increased only 2.0% quarter-on-quarter due to lower issuance, while corporate bond issuance increased 6.8% after a decline in the previous quarter.

Government bond yields in Vietnam decreased across most maturities from December 1, 2023 to February 29, 2024. In 2023, the SBV reduced the refinancing rate by a total of 150 basis points from April to June 2023, then kept the rate stable from July 2023 to support economic growth.

The latest edition of the Asia Bond Monitor features a summary of the Lao bond market for the first time. It also presents the results of the AsianBondsOnline Bond Market Liquidity Survey 2023.

The survey results showed that liquidity conditions improved last year, bid-ask spreads narrowed and trading volumes increased for both government and corporate bonds .

Minh Duc