News Highlights - Week of 3 - 7 October 2011

Consumer price inflation in Indonesia eased to 4.6% year-on-year (y-o-y) in September as food prices declined. In the Republic of Korea, inflation eased to 4.3% y-o-y in September from 5.3% in August. Consumer price inflation in Thailand also fell in September to 4.0% y-o-y from 4.3% in the previous month due to a slowdown in rising energy prices and transport costs. Meanwhile, inflation in the Philippines inched up to 4.8% y-o-y in September from 4.7% in August. 

*The People's Republic of China's (PRC) purchasing managers' index (PMI) for services rebounded to 59.3 in September from 57.3 in August, indicating a recovery in the services sector. In contrast, Singapore's manufacturing activity contracted for the third straight month in September, with the PMI at 48.3 in September.

*Indonesia's export growth eased to 37.1% y-o-y in August for total exports of USD18.8 billion after posting revised 39.5% annual growth in July. Indonesia's imports rose 23.7% y-o-y to USD15.1 billion in August, following revised 28.4% growth in the previous month. The trade surplus in August was USD3.8 billion. Malaysia's merchandise exports posted 10.9% growth in August, higher than the 7.1% export growth rate for July. Meanwhile, imports grew 6.9% y-o-y in August. 

*Bank Indonesia (BI) issued new regulations governing export proceeds and foreign debt withdrawals. Under the new policy, exporters will be required to transfer their proceeds from offshore banks into domestic banks within 3 months of the date posted on the Export Declaration Form. Another new BI regulation requires debtors to conduct their foreign borrowing through domestic banks.

*Net foreign investment outflows from the Republic of Korea's LCY bond market were KRW2.5 billion in September. Net inflows in August totaled KRW134.0 billion. The largest net bond investment inflows in September came from Thailand (KRW726.5 billion), the US (KRW619.3 billion), Malaysia (KRW603.8 billion), and the PRC (KRW 400.3 billion).

*Thailand plans to begin targeting headline inflation instead of core inflation to attain greater flexibility in conducting monetary policy. 

*The State Bank of Viet Nam raised its refinancing rate, one of its three policy rates, by 100 basis points to 15% effective today. The move is the fifth increase in the refinancing rate for the year. 

*In Hong Kong, China, Sinotrans Shipping Inc. priced 3-year CNH bonds with a coupon of 3.3%. In Malaysia, Midciti Resources, which co-owns the Petronas Towers, sold MYR880 million worth of Islamic medium-term notes. The multi-tranche issuance include MYR280 million worth of 3-year notes with a 3.533% annual return, MYR270 million of 5-year notes at 3.919%, MYR240 million of 7-year notes at 4.07%, and MYR90 million of 10-year notes at 4.25%. 

*Government bond yields fell last week for all tenors in the Republic of Korea and Thailand; and for most tenors in Hong Kong, China; and Malaysia, while yields rose for most tenors in Indonesia, the Philippines, Singapore and Viet Nam. The PRC market was closed due to the national holiday. Yield spread between 2- and 10- maturities widened only in Malaysia, while spreads narrowed in other emerging East Asian markets except for the PRC.