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Ratings agency Standard & Poor's today cautioned that it could lower the sovereign ratings of countries like India, Japan and Malaysia, which are still to come out of the economic meltdown of 2008. 

"The implications for sovereign creditworthiness in the Asia-Pacific would likely be more negative than previously experienced and a larger number of negative rating actions would follow," S&P said in its report on Asia-Pacific Sovereigns. 

"Fiscal capacities of Japan, India, Malaysia, Taiwan and New Zealand have shrunk relative to pre-2008 level," it said, adding that these countries continue to bear the scars of the downturn. 

The governments, it said, would be required to use their own revenue streams to support their economies and financial sector once again. 

It further said that if a renewed slowdown comes, it would create a deeper and more prolonged impact. 

At the time of the global financial crisis in 2008, several countries, including India, had rolled out stimulus packages facilitating monetary expansion and lower taxes to mitigate the impact of the slowdown. 

Standard and Poor's downgraded its sovereign rating for the US government last week from AAA to AA+. In response, government bond yields fell in most Asian bond markets. Yields fell for all tenors in Indonesia and the Republic of Korea, and for most tenors in Hong Kong, China; Malaysia; the Philippines; Singapore; and Thailand, although yields rose for most tenors in the PRC and Viet Nam. Yield spreads between 2- and 10- year maturities widened in the PRC, Indonesia, the Republic of Korea and Thailand, while spreads narrowed in most other emerging East Asian markets. 

Consumer price inflation eased in Indonesia and the Philippines in July, while creeping marginally higher in Thailand. Indonesia's consumer prices increased 4.6% year-on-year (y-o-y) in July, down from a 5.5% rise in June. In the Philippines, consumer price inflation eased slightly to 5.1% y-o-y in July from 5.2% in June, based on 2006 inflation series data. Slower annual price hikes in energy costs and food and non-alcoholic beverages contributed to the downtrend. Meanwhile, Thailand's consumer price inflation rose incrementally higher to 4.08% y-o-y in June from 4.06% in May on the back of higher food and energy prices.

Total bank deposits in Hong Kong, China (LCY and FCY) fell 0.9% month-on-month (m-o-m) to HKD7.2 trillion, mainly due to the decline in Hong Kong dollar deposits, which shrank 1.6% to HKD3.62 trillion. Hong Kong, China's M2 money supply also fell 1.3% m-o-m in June. Japan's monetary base grew 15.0% y-o-y in July to reach JPY113.7 trillion.

Indonesia's economy expanded 6.5% y-o-y in 2Q11, growing at the same pace it did in 1Q11. Indonesia's exports grew 49.3% y-o-y to USD18.4 billion in June. In Malaysia, export growth rose to 8.6% y-o-y in June from 5.4% in May. Singapore's purchasing managers' index (PMI) fell to 49.3 in July, after a posting 50.4 in June, due to a slowdown in global manufacturing.

Issuance of asset-backed securities (ABS) in the Republic of Korea soared 34.1% y-o-y to KRW14.7 trillion in 1H11, led by Korea Housing Finance Corporation. Net foreign investment into LCY-denominated bonds in the Republic of Korea stood at KRW2.9 trillion in July-the highest monthly figure in the first 7 months of the year. Investments from Thailand and Singapore boosted the inflows, while the largest net outflows went to France.

The Philippines incurred a budget deficit of PHP17.2 billion in 1H11, which was much lower than the programmed amount of PHP152.1 billion, as the government limited spending while revenue collections by the Bureau of Internal Revenue (BIR) improved. The national government posted a fiscal deficit of PHP7.7 billion in the month of June.

China Resources Land issued USD250 million worth of 5-year senior notes with a coupon of 4.625%. In Hong Kong, China, the government issued 10-year Hong Kong Special Administrative Region (HKSAR) government bonds worth HKD2.5 billion and carrying a coupon of 2.46%. Indonesian wood processing firm Sarana Bina Semesta Alam issued 5-year USD10 million notes with a coupon of 6.0%. National Agricultural Cooperative Foundation in the Republic of Korea priced USD500 million of 5.5-year bonds with a coupon of 3.50%. 

After an emergency meeting Sunday, the European Central Bank said it will relaunch its government bond-buying program.

"The ECB will actively implement its Securities Markets Program. This program has been designed to help restoring a better transmission of our monetary policy decisions -- taking account of dysfunctional market segments -- and therefore to ensure price stability in the euro area," the ECB's Governing Council said in a statement.

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