Southeast Asia holds its nerve as currencies rise

Finance ministers from the Association of South-East Asian Nations (Asean) this week emphasized their intentions to keep their economies open to foreign capital, despite escalating exchange rate pressures

  • By Liz Chong
  • 10 Oct 2010
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“Asean economies remain very open to capital inflows and that augurs well for Asean,” Heng Swee Keat, managing director of the Monetary Authority of Singapore, told Emerging Markets.

Finance ministers from Indonesia, the Philippines and Thailand said they hope to continue liberalization and financial markets development, as a means to achieve poverty reduction and sustained growth.

Agus Martowadojo, the new Indonesian finance minister, said he was committed to a free trade agenda and would work to prevent protectionism, as part of plans to tackle the “unacceptable level of people living in poverty”.

Exports from the Asean nations are under pressure as their currencies have soared this year, in part because of their strong growth prospects. According to the IMF’s latest figures, Asean will see growth of 6.6% this year, compared to 1.7% last year. In contrast the global economy will expand 3.7% this year and 3.3% the next.

The peso has been trading near a two-year high, the baht at its strongest levels since the 1997 financial crisis and the rupiah at its highest since 2007. The Singaporean dollar has burst through the $1.30 level against the US dollar.

Cesar Purisima, the newly appointed finance minister for the Philippines, said he hoped to issue zero-coupon bonds soon, to help fund infrastructure projects such as water supply and airport upgrades.

The government is keen to raise funds from capital markets to bolster its finances and last month sold its first global peso bond.

Purisima outlined a comprehensive platform that includes infrastructure projects including water, streamlining bureaucracy, improved tax collection and pursuit of tax evaders.

Purisima said he hoped to learn from the success of Thailand and Malaysia in growing their tourism industry, partly because the Philippines has 27,000 square kilometers of coral reefs.

As of 2006, around 20 million Filipinos lived below $1.25 a day, while 40 million survived on less than $2.

Inflation is another key issue on the agenda for Asean, as accelerating growth has prompted many central banks to put on the brakes by hiking interest rates.

Heng called for Asean nations to consider buying commodities in response to the recent surge in prices. Since 30 June, sugar has soared 40%, wheat 59% and barley 49%.

Supplies of wheat are under pressure as bad weather in key producing countries has hurt crop yields. US farmers are expected to harvest less corn than expected and the stockpile has shrunk to its lowest levels in seven years due to strong demand for grain.

“We have to think about investing on the supply side, particularly on food, before it becomes a problem like it did in 2008,” Heng said.

Two years ago food prices spiked and staples such as rice and wheat hit record levels, sparking social unrest globally.

Food security is also a priority for the Philippines, which needs to ensure that prices stay low, said Purisima.

  • By Liz Chong
  • 10 Oct 2010

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 315,565.94 1183 8.89%
2 JPMorgan 288,650.70 1316 8.13%
3 Bank of America Merrill Lynch 284,218.69 988 8.01%
4 Goldman Sachs 215,758.12 710 6.08%
5 Barclays 207,555.74 805 5.85%

Bookrunners of All Syndicated Loans EMEA

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1 HSBC 32,400.29 147 6.76%
2 Deutsche Bank 32,042.83 103 6.69%
3 Bank of America Merrill Lynch 28,820.43 84 6.02%
4 BNP Paribas 25,608.74 143 5.35%
5 Credit Agricole CIB 22,617.86 130 4.72%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 JPMorgan 18,067.92 70 9.12%
2 Morgan Stanley 15,215.44 76 7.68%
3 UBS 14,195.29 55 7.17%
4 Citi 14,014.57 86 7.07%
5 Goldman Sachs 12,113.98 67 6.11%