Green bonds are booming in emerging East Asia.

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, far exceeding the 21% growth of the global and Eurozone sustainable bond markets, according to a new report by the Asian Development Bank (ADB).

Sustainable bonds in ASEAN+3 economies totaled US$798.7 billion at the end of last year, accounting for approximately 20% of the total global sustainable bond volume, according to the latest edition of the “Asian Bond Market Watch” report published on March 21.

The global and Eurozone sustainable bond markets reached $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.

“Sustainable bond issuances in ASEAN accounted for a higher share of local currency financing and long-term financing in 2023, thanks to public sector participation,” said Albert Park, ADB’s chief economist. “Public sector participation not only supplements the supply of sustainable bonds, but also serves as a model for the private sector and helps establish long-term pricing standards for these bonds in domestic markets.”

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

Finance, banking, and green bonds are booming in emerging East Asia. — The "supertree" is on display at Gardens by the Bay – a symbol of Singapore's efforts to promote green spaces. Photo: National Geographic

ASEAN has a higher proportion of local currency financing and long-term financing in sustainable bond issuance, with 80.6% of sustainable bonds issued in local currency and a weighted average maturity of 14.7 years. This significantly surpasses the corresponding figures 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 improved slightly between December 1, 2023, and February 29, 2024, as the US Federal Reserve (Fed) was expected to ease monetary policy, while inflation remained moderate and most economies in the region experienced stable growth.

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

The emerging East Asian local currency bond market rose 2.5% in the fourth quarter of 2023 to $25.2 trillion. Total bond issuance decreased 4.8% quarter-on-quarter as most governments had already met funding requests in previous quarters, while China saw a decline in corporate borrowing amid weak economic prospects.

Vietnam's local currency bond market declined 0.4% year-on-quarter due to the large volume of maturing state-owned bank bills. A total of VND 360.3 trillion (US$14.8 billion) of state-owned bank bills matured in the fourth quarter of 2023, while the State Bank of Vietnam (SBV) ceased issuing bills last November.

Government bond outstanding increased by only 2.0% compared to the previous quarter due to a decrease in issuance, while corporate bond issuance increased by 6.8% after a decline in the previous quarter.

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

The latest edition of the “Asian Bond Market Monitor” report highlights, for the first time, a summary of the Lao bond market. The report also presents the results of the AsianBondsOnline Bond Market Liquidity Survey 2023.

The survey results show that liquidity conditions improved last year, the bid-ask spread narrowed, and trading volume increased for both government and corporate bonds .

Minh Duc

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