4 July 2011

Indonesia's Finance Ministry reported last week that it expects its 2011 budget deficit to be in a range of 1.9%-2.1% of GDP. The Philippine fiscal deficit was PHP9.5 billion in the first 5 months of the year. Meanwhile, Viet Nam's budget deficit reached VND27.8 trillion in the first half of 2011. The People's Republic of Chinas (PRC) local government debt stood at CNY10.7 trillion at end-2010 according to the National Audit Office. Trade deficits were recorded for May in Hong Kong, China; for January-April in the Philippines; and for January-June in Viet Nam; amounting to HKD35.7 billion, USD4.6 billion, and USD6.7 billion, respectively. In contrast, trade surpluses were posted for June in the Republic of Korea (USD3.3 billion), and for May in Indonesia (USD3.5 billion) and Thailand (USD274 million). The Republic of Korea registered a current account surplus in May of USD2.3 billion. Viet Nam's real GDP growth rate in 1H11 stood at 5.6% y-o-y, improving to 5.7% in 2Q11 from 5.4% in 1Q11. Industrial output in Japan and the Republic of Korea accelerated in May by 5.7% and 1.7% m-o-m, respectively, while also expanding 4.6% m-o-m in Viet Nam in June. In contrast, growth in the Philippines' volume of production index eased to 2.6% y-o-y in April from 9.7% in the previous month, while manufacturing production in Thailand contracted 3.9% y-o-y in May. Malaysia raised USD2.0 billion from the sale of 5- and 10-year sukuk (Islamic bonds) last week. In Malaysia, Telekom Malaysia issued a MYR300 million 10-year Islamic note; Antara Steel Mills sold a MYR300 million Islamic bond in five tranches; and Sabah Development Bank priced a MYR300 million 5-year Islamic bond last week. Meanwhile Korea Eximbank priced a

Key Developments in Asian Local Currency Markets

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onsumer price inflation in Indonesia eased to 5.5% year-on-year (y-o-y) in June from 6.0% in May. In the Republic of Korea, consumer price inflation rose to 4.4% y-o-y in June from 4.1% in May, mainly due to higher food, housing, and utility costs. Thailand's consumer price inflation was 4.1% y-o-y in June, compared with 4.2% in May. In Japan, inflation remained steady in both April and May at 0.3% y-o-y.

Asia Bond Monitor March 2011

10-Year Selected LCY Government Security Yields
Markets

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Close of 1 July 2011

basis point change from Latest Closing Previous Day* Previous Week* 1-Jan-11*
3.18 3.03 1.14 3.89 2.27 8.36 7.53 3.94 4.33 6.25 2.34 3.88 12.62 2.23 0.90 0.00 0.00 0.00 2.80 -2.20 0.90 4.00 -6.28 3.00 0.00 7.00
20.00 3.00 -5.00 6.50 10.70 3.00 1.10 7.00 -7.05 6.00 8.80 -8.00 31.87 31.87 20.00 3.00 -5.00 6.50 10.70 3.00 1.10 7.00 -7.05 6.00 8.80 -8.00

US EU Japan PRC Hong Kong, China India Indonesia Malaysia Korea, Rep. of Philippines Singapore Thailand Viet Nam

-11.12 7.10 1.20 -2.00 -58.50 43.90 -7.90 -10.00 -19.00 35.90 -37.00 15.70 87.00

Selected Government Security Yields Benchmark Yield Curves - Local Currency Government Bonds 2-versus-10 Yield Spread Chart Policy Rate versus Inflation Rate Charts Credit Default Swap Spreads & Exchange Rate Indexes Selected Debt Security Issuances Selected Asia Data Releases

JPY80 billion triple-tranche samurai bond last week. In the PRC last week, Industrial and Commercial Bank of China (ICBC) sold CNY38.0 billion worth of subordinated bonds, while in Indonesia Bank Permata issued IDR1.75 trillion of subordinated debt last week. In the Philippines, Manila Electric Co. issued PHP5.0 billion in 7- and 10-year notes and Filinvest Land offered PHP3.0 billion of retail bonds. In Thailand, Noble Development sold THB1.5 billion of 3year bonds and Provincial Waterworks Authority issued THB1.0 billion of 8-year bonds last week. Government bond yields fell last week for all tenors in the PRC and Viet Nam, and for most tenors in Indonesia and the Philippines. Yields rose for all tenors in the Republic of Korea, and for most tenors in Hong Kong, China; Malaysia and Thailand. Yield movements were mixed in Singapore. Yield spreads between 2- and 10 year maturities widened in most emerging East Asian markets.

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Summary Text of News Articles Consumer Price Inflation Eases in Indonesia and Thailand, Rises in the Republic of Korea, Remains Unchanged in Japan

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Consumer price inflation in Indonesia eased for a fifth straight month in June to 5.54% year-on-year (y-o-y) from 5.98% in May. On a month-on-month (m-o-m) basis, however, consumer price inflation rose to 0.55% in June from 0.12% in May as monthly food price hikes persisted. In the Republic of Korea, inflation based on the consumer price index (CPI) increased 0.3 percentage points from the previous month to 4.4% y-o-y in June, while on a m-o-m basis inflation increased to 0.2% in June from zero in May. The upward trend in consumer prices was mainly due to increases in the costs of food, housing, and utilities. In Thailand, consumer price inflation stood at 4.1% y-o-y in June, slightly lower than the previous month's 4.2%. In Japan, the CPI rose 0.3% y-o-y in May for the second straight month, while the core CPI increased 0.6%. For trends in Indonesia's inflation rate, refer to this link: http://asianbondsonline.adb.org/indonesia/data/marketwatch.php?code=policy_rate_and_inflation_trends For trends in Japan's inflation rate, refer to this link: http://asianbondsonline.adb.org/japan/data/marketwatch.php?code=policy_rate_and_inflation_trends For trends in the Republic of Korea's inflation rate, refer to this link: http://asianbondsonline.adb.org/korea/data/marketwatch.php?code=policy_rate_and_inflation_trends For trends in Thailand's inflation rate, refer to this link: http://asianbondsonline.adb.org/thailand/data/marketwatch.php?code=policy_rate_and_inflation_trends

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The Peoples Republic of China's (PRC) National Audit Office publicly revealed the size of local governments' aggregated debt for the first time. The debts amounted to CNY10.7 trillion at end-2010. Of the CNY10.7 trillion, local governments are explicitly responsible for repaying CNY6.7 trillion, or about 63%, with the remainder comprising debt guarantees and loans that might potentially be repaid by local governments.

PRC's Local Government Debt Reached CNY10.7 Trillion at end-2010

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Indonesia's Finance Ministry Forecasts a 2011 Budget Deficit Equal to 1.9%-2.1% of GDP; Philippines Records PHP9.5 Billion Budget Deficit in January-May; Viet Nam's Budget Deficit Reaches VND27.8 Trillion in 1H11

Indonesia's Finance Ministry reported last week that the 2011 budget deficit would fall within a range of 1.9%-2.1% of gross domestic product (GDP), despite the government's plan to raise fuel subsidy quotas. The government's initial target for the budget deficit was 1.8% of GDP. The Finance Ministry is scheduled to discuss the 2011 revised state budget with the House of Representatives in July. The Philippines's year-to-date fiscal position fell into deficit in May, amounting to PHP9.54 billion in the first 5 months of the year after the government posted a deficit of PHP 9.6 billion in May. (In January-April, the government reported a modest fiscal surplus of PHP61 million.) Over the January-May period, revenue grew 16.3% y-o-y as the Bureau of Internal Revenue and Bureau of the Treasury increased revenue collection by 13.7% and 124.3%, respectively. On the other hand, receipts at the Bureau of Customs' shrank 0.5% y-o-y during the same period. Government expenditures amounting to PHP591 billion were down 10.7% from the same period of last year. According to Viet Nam's Ministry of Finance, the country's budget deficit during the first 6 months of 2011 reached VND27.8 trillion, which is about 23% of the ministry's targeted VND130.6 trillion budget deficit for the full year. Government revenue amounted to VND327.8 trillion, while government expenditures totaled VND355.6 trillion. Viet Nam is targeting a lower fiscal deficit in 2011 equivalent to 5.3% of GDP, compared with 5.6% in 2010. For statistics on Indonesia's fiscal balance, refer to this link: http://asianbondsonline.adb.org/indonesia/data/macroeconomic_credit.php

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Summary Text of News Articles Indonesia's Finance Ministry Forecasts a 2011 Budget Deficit Equal to 1.9%-2.1% of GDP; Philippines Records PHP9.5 Billion Budget Deficit in January-May; Viet Nam's Budget Deficit Reaches VND27.8 Trillion in 1H11 (cont)

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For statistics on the Philippines' fiscal balance, refer to this link: http://asianbondsonline.adb.org/philippines/data/macroeconomic_credit.php For statistics on Viet Nam's fiscal balance, refer to this link: http://asianbondsonline.adb.org/vietnam/data/macroeconomic_credit.php

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Trade Deficits in Hong Kong, China; Philippines; and Viet Nam; Trade Surpluses in Indonesia, Republic of Korea, and Thailand

Hong Kong, China's exports grew 10.1% y-o-y in May to HKD279.9 billion, following growth in April of 4.1%. Exports within Asia showed the largest gains, with exports to Taipei,China increasing 40.6% y-o-y and exports to Thailand increasing 35.4%. In contrast, exports to Japan, the United States (US), and the United Kingdom (UK) declined 6.1%, 2.4%, and 7.4% y-o-y, respectively. Import growth increased to 13.0% y-o-y in May from 6.1% in April. As a result, a trade deficit of HKD35.7 billion was recorded for the month. In Indonesia, the trade surplus jumped to USD3.5 billion in May from USD1.7 billion in April as export growth accelerated to 45.3% y-o-y from 37.5% in the previous month. Imports also climbed 48.5% y-o-y in May after rising 32.5% in April. The Republic of Korea recorded a trade surplus of USD3.3 billion in June, up from a surplus of USD2.2 billion in May. The export growth rate for the month stood at 14.5% y-o-y, while import growth was 27.4%. In the Philippines, the trade deficit in goods during the first 4 months of 2011 surged 91.4% y-o-y to USD4.6 billion. Imports grew 21.7% y-o-y to USD21.1 billion, while exports were up 10.6% to USD16.5 billion. In April, imports grew 20.3% y-o-y, following 21.8% growth in March, to reach USD5.5 billion. Electronic products, which expanded 11.5% y-oy in April, accounted for 30.7% of the aggregate import bill. The top five sources of imports came from the US; People's Republic of China (PRC); Singapore; Taipei,China; and Japan. In Thailand, total exports grew 17.3% y-o-y in May to reach USD19.3 billion, following 24.7% growth in April. Exports of agricultural products expanded 74.2% y-o-y amid a record-high in rice exports, while exports of manufacturing products also grew, led by electrical appliances. However, exports of automobiles and auto parts continued to contract as a result of decreased automobile production. Meanwhile, total imports expanded 34.4% y-o-y in May to reach USD19.0 billion, compared with 26.3% growth in April. Import values rose in all product categories except for vehicles and parts. The trade surplus stood at USD274 million in May after posting a deficit of USD477 million in April. In Viet Nam, total exports reached USD42.3 billion in 1H11, which was 30.3% higher than in the same period last year. The share of agriculture and forestry products as a portion of total exports increased from 16.0% to 21.1% between 1H10 and 1H11, mainly due to an increase in prices. On the other hand, the share of heavy industrial and mineral goods as a portion of total exports dropped from 30.2% to 29.5% between 1H10 and 1H11, while light industrial and handicraft items decreased from 43.5% to 41.3% and gold and gold products decreased from 4.1% to 2.0%. The US remained Viet Nam's top export market with USD7.6 billion in total exports, followed by the European Union (EU) and the Association of South East Asian Nations (ASEAN) with USD7.4 billion and USD6.1 billion, respectively. Meanwhile, total imports in 1H11 rose 25.8% y-o-y to USD49.0 billion. The country's trade deficit in the first 6 months stood at USD6.7 billion. For statistics on the Republic of Korea's export and import growth rates, refer to this link: http://asianbondsonline.adb.org/korea/data/macroeconomic_credit.php For statistics on the Philippines' export and import growth rates, refer to this link: http://asianbondsonline.adb.org/philippines/data/macroeconomic_credit.php

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Summary Text of News Articles Trade Deficits in Hong Kong, China; Philippines; and Viet Nam; Trade Surpluses in Indonesia, Republic of Korea, and Thailand (cont)

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For statistics on Thailand's export growth rates, refer to this link: http://asianbondsonline.adb.org/thailand/data/macroeconomic_credit.php For statistics on Viet Nam's export growth rates, refer to this link: http://asianbondsonline.adb.org/vietnam/data/macroeconomic_credit.php

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The Republic of Korea posted a current account surplus (USD2.3 billion) for the 15th straight month in May on the back of a solid surplus position in the goods account as well as improvements in net dividend payments. The goods account surplus in May was USD1.7 billion, following a surplus of USD3.3 billion in April, while the primary income account recorded a surplus of USD520 million in May after posting a deficit of USD1.6 billion in the previous month. The services and secondary income accounts also registered surpluses of USD15.5 million and USD15.8 million, respectively. Viet Nam's real GDP grew 5.6% y-o-y in 1H11, down from 6.2% growth in the same period last year. In 2Q11, GDP expanded 5.7% y-o-y after growing 5.4% in the previous quarter. In 1H11, the country's agriculture, forestry, and fisheries sector grew 2.1% y-o-y, while the industry and construction sector and service sector registered 6.5% and 6.1% growth rates, respectively. For statistics on the Republic of Korea's current account balance, refer to this link: http://asianbondsonline.adb.org/korea/data/macroeconomic_credit.php For statistics on Viet Nam's GDP growth rate, refer to this link: http://asianbondsonline.adb.org/vietnam/data/macroeconomic_credit.php

Republic of Korea Posts Current Account Surplus for 15th Straight Month in May; Viet Nam's Economy Expands 5.6% in 1H11

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Japan's industrial output expanded 5.7% m-o-m in May, the second straight monthly increase. (In April factory output rose 1.6% m-o-m after plunging 15.3% in March.) The Ministry of Economy, Trade, and Industry forecasts factory output will rise 5.3% m-o-m in June and 0.5% in July. In the Republic of Korea, the industrial production index climbed 1.7% m-o-m in May after declining 1.7% in April. On a y-o-y basis, the industrial production growth rate improved to 8.3% in May from 6.9% in the previous month. Growth in the volume of production index (VOPI) in the Philippines eased to 2.6% y-o-y in April from 9.7% in March, mainly due to a decline in the production of basic metals. On a m-o-m basis, the VOPI fell 4.3% in April. The output in leather products, transport equipment, miscellaneous manufactures, furniture and fixtures, chemical products, and fabricated metal products contracted during the month.

Industrial Output Growth Increases in Japan, Republic of Korea, and Viet Nam, Slows in the Philippines and Falls in Thailand

Thailand's manufacturing production index (MPI) fell 3.9% y-o-y in May, which was attributed to a drop in automobile production and a lack of auto parts. However, the MPI's performance in May was an improvement from April's decline of 8.1% y-o-y. Car production fell 32.5% y-o-y in May, while car sales shrank 33.3% as Japanese auto parts makers were affected by the March earthquake and tsunami. Overall car production in Thailand is expected to return to normal conditions in 3Q11. According to the Office of Industrial Economics, its prior projection of an MPI increase of 6%-8% for the full-year 2011 will be reduced as the index has now fallen in 4 consecutive months. In Viet Nam, the index of industrial production (IIP) grew 12.7% y-o-y and 4.6% m-o-m in June. During the first 6 months of the year, the IIP increased 9.7% y-o-y. In January-June, the mining and quarrying sector and the manufacturing industry expanded production 2.8% and 12.7% y-o-y, respectively, while production of the power, gas, and water sector rose 10.3% y-o-y.

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Summary Text of News Articles Industrial Output Growth Increases in Japan, Republic of Korea, and Viet Nam, Slows in the Philippines and Falls in Thailand (cont)

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For statistics on Japan's industrial production growth rate, refer to this link: http://asianbondsonline.adb.org/japan/data/macroeconomic_credit.php For statistics on Thailand's manufacturing production growth rate, refer to this link: http://asianbondsonline.adb.org/thailand/data/macroeconomic_credit.php For statistics on Viet Nam's industrial production growth rate, refer to this link: http://asianbondsonline.adb.org/vietnam/data/macroeconomic_credit.php

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In Malaysia, the government sold USD2.0 billion worth of 5- and 10-year sukuk (Islamic bonds) in the international market, establishing a new benchmark in Islamic capital markets. The sukuk was issued via a special purpose vehicle, Wakala Global Sukuk Berhad, and structured under the sharia'h (Islamic law) principle of wakala (agency agreement). The USD1.2 billion worth of 5-year sukuk was priced at 2.991%, while the USD800 million 10-year sukuk pays 4.646%. The sukuk was rated A- by Standard and Poor's, and A3 by Moody's. About 29% of the sukuk was allocated to investors from the Middle East, 27% to Malaysian-based investors, 22% to the rest of Asia, 14% to Europe, and 8% to the US. Telekom Malaysia issued MYR300 million worth of 10-year Islamic notes last week. The notes were priced at 4.5% and rated AAA by RAM Ratings. Antara Steel Mills sold a five-tranche MYR300 million Islamic note that was guaranteed by national bond guarantee agency Danajamin Nasional. Each tranche is worth MYR60 million, with the 3-year tranche paying 4.02%, the 4-year at 4.17%, the 5-year at 4.32%, the 6-year at 4.47%, and the 7-year at 4.62%. Proceeds from the issuance will be used to refinance outstanding paper maturing in August and to fund working capital. Meanwhile, Sabah Development Bank priced MYR300 million worth of 5-year sukuk at 4.43%. The bond was rated AA1 by RAM Ratings. Korea Eximbank priced JPY80 billion worth of triple-tranche samurai bonds last week, its second samurai issuance since June 2007. The largest tranche was a 2-year bond amounting to JPY58.4 billion with a coupon rate of 0.93%. The other two tranches were JPY11.6 billion of 3-year bonds at a 1.06% coupon and a JPY10.0 billion 5-year bond at a 1.32% coupon.

Malaysia Issues USD2.0 Billion Sukuk; Local Currency Sukuk Issuance from Telekom Malaysia, Antara Steel Mills, and Sabah Development Bank; Korea Eximbank Prices JPY80 Billion Samurai

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In the PRC, the Industrial and Commercial Bank of China (ICBC) sold CNY38.0 billion of 20-year subordinated bonds at a coupon rate of 5.56% last week. The bond is callable after 15 years. Meanwhile, Guangong Guangxin Holdings, which primarily produces building materials, issued CNY1.0 billion worth of medium-term notes (MTNs). The MTNs carry a tenor of 5 years and a coupon of 6.35%. China Lianhe Credit Rating gave the MTNs an A rating. Jiangsu BeijingShanghai Expressway issued CNY1.0 billion in commercial paper. The bills were priced to yield 5.37% and have a maturity of 366 days. China Cheng Xin International Credit Rating rated the issuance as A-1. In the Philippines, Manila Electric Co. (Meralco) issued PHP5.0 billion of fixed-rate notes comprising PHP500 million of 7-year and PHP4.5 billion of 10-year bonds. The coupon rates were set at 6.2692% and 6.89%, respectively. Proceeds from the issue will fund capital expenditures and general corporate expenses. Also, Filinvest Land offered PHP3 billion of retail bonds last week with the coupon rate set at 6.1962%..

Subordinated Debt, MTNs, and Commercial Paper Issuance in the PRC; Meralco Sells PHP5.0 Billion of Fixed-Rate Notes; Filinvest Land Offers PHP3 Billion Retail Bonds; Noble Development and Provincial Waterworks Authority Issues THBDenominated Bonds; F&N Treasury Raises SGD50 Million from 7-Year Bond Sale

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Summary Text of News Articles Subordinated Debt, MTNs, and Commercial Paper Issuance in the PRC; Meralco Sells PHP5.0 Billion of Fixed-Rate Notes; Filinvest Land Offers PHP3 Billion Retail Bonds; Noble Development and Provincial Waterworks Authority Issues THBDenominated Bonds; F&N Treasury Raises SGD50 Million from 7-Year Bond Sale (cont)

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Thai property developer Noble Development sold THB1.5 billion of 3-year senior bonds last week. The bonds will pay a coupon of 5.25%, 5.75%, and 6.20% in the first, second, and third year, respectively. Proceeds from the bond issue will finance residential project development and debt repayment. Stated-owned Provincial Waterworks Authority issued THB1.0 billion of 8-year bonds at a coupon of 3.76%. Meanwhile, Singapore's F&N Treasury issued 7-year floating rate bonds worth SGD50 million last week.

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PT Bank Permata Issues IDR1.75 Trillion of Subordinated Debt; Bank Tabungan Pensiunan Sells IDR500 Billion of DualTranche Bonds; Bank Tabungan Negara Issues IDR1.3 Trillion of 10-Year Bonds

PT Bank Permata issued IDR1.75 trillion of subordinated bonds last week. The subdebt issue carried a coupon of 11.0% and a maturity of 7 years. The deal was an upsize from an original plan of IDR1.0 trillion. Proceeds from the issue will be used to fund the bank's lower Tier 2 capital requirements. Bank Tabungan Pensiunan Nasional Tbk sold IDR500 billion dual-tranche bonds last week. The bank issued 3-year bonds worth IDR165 billion with a coupon of 9.25% and 5-year bonds worth IDR335 billion with a coupon of 9.90%. The proceeds from the bond issue will be used to support the bank's loan expansion program. Home mortgage provider PT Bank Tabungan Negara Tbk sold IDR1.3 trillion of 10-year bonds last week. The bonds carried a coupon of 9.5%. Proceeds from the issue will be used to support the bank's housing loan expansion.

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Selected Government Security Yields

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3-Month Selected LCY Government Security Yields

basis point change from Previous Previous 1-Jan-11* Day* Week* 1.02 0.51 1.02 -10.44 10.40 -0.10 10.40 78.70 1.00 0.00 1.00 -2.40 -5.00 -14.00 -14.00 24.00 -1.00 0.00 -1.00 -22.00 -5.00 -10.00 -5.00 100.00 0.40 0.30 0.40 13.50 4.00 0.00 4.00 81.00 -5.12 -20.14 -20.14 160.36 0.00 0.00 0.00 -7.00 7.50 0.00 7.50 107.83

Markets US EU Japan PRC Hong Kong, China India Malaysia Korea, Rep. of Philippines Singapore Thailand
Close of 1 July 2011

Latest Closing 0.02 1.18 0.10 3.42 0.06 8.10 2.91 3.32 2.80 0.32 3.05

10-Year Selected LCY Government Bond Yields

Markets US EU Japan PRC Hong Kong, China India Indonesia Malaysia Korea, Rep. of Philippines Singapore Thailand Viet Nam Latest Closing 3.18 3.03 1.14 3.89 2.27 8.36 7.53 3.94 4.33 6.25 2.34 3.88 12.62 basis point change from Previous Previous 1-Jan-11* Day* Week* 2.23 31.87 31.87 -11.12 20.00 0.90 20.00 7.10 3.00 3.00 0.00 00 1.20 0.00 -5.00 -5.00 -2.00 6.50 6.50 0.00 -58.50 10.70 2.80 10.70 43.90 3.00 3.00 -2.20 -7.90 1.10 0.90 1.10 -10.00 7.00 7.00 4.00 -19.00 -7.05 -6.28 -7.05 35.90 6.00 3.00 6.00 -37.00 8.808.80 0.00 15.70 -8.00 7.00 -8.00 87.00

Close of 1 July 2011

Source: Based on data from Bloomberg, LP.

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Indonesia

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Benchmark Yield Curves Local Currency Government Bonds

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China, Peoples Rep. of

4.25 4.00 3.75 3.5 3.0 2.5

Hong Kong, China

12.0 11.0 10.0

Yield (%)

Yield (%)

2.0 1.5 1.0 0.5 0.0

Yield (%)

3.50 3.25 3.00 2.75 2.50 2.25 0 1 2 3 4 5 6 7 8 9 10 11 12

9.0 8.0 7.0 6.0 5.0 4.0

10

12

14

16

12

15

18

21

24

27

30

33

Time to maturity (years)

01-Jul-11 24-Jun-11 17-Jun-11 01-Jul-11

Time to maturity (years)

24-Jun-11 17-Jun-11 01-Jul-11

Time to maturity (years)

24-Jun-11 17-Jun-11

Korea, Republic of
6.00 5.50 5.00 4.8 4.6 4.4 4.2 4.0 3.8 3.6 3.4 3.2 3.0 2.8 2.6 0 2 4 6

Malaysia
10.0 9.0 8.0 7.0 Yield (%) 6.0 5.0 4.0 3.0 2.0 1.0 0.0 8 10 12 14 16 18 20 22 0 3 6

Philippines

Yield (%)

4.00 3.50 3.00 2.50 0 2 4 6 8 10 12 14 16 18 20 22

Yield (%)

4.50

12

15

18

21

24

27

Time to maturity (years)

01-Jul-11 24-Jun-11 17-Jun-11

Time to maturity (years)

01-Jul-11 24-Jun-11 17-Jun-11 01-Jul-11

Time to maturity (years)

24-Jun-11 17-Jun-11

Singapore
3.8 3.3 2.8 2.3 1.8 1.3 0.8 0.3 0 3 6 9 12 15 18 21 4.5 4.3 4.0 3.8 3.5 3.3 3.0 2.8 2.5 2.3 2.0 0 2 4

Thailand
13.3 13.0

Viet Nam

Yield (%)

Yield (%)

Yield (%)

12.8 12.5 12.3 12.0

10

12

14

16

9 10 11 12 13 14 15 16 17

Time to maturity (years)

01-Jul-11 24-Jun-11 17-Jun-11 01-Jul-11

Time to maturity (years)

24-Jun-11 17-Jun-11 01-Jul-11

Time to maturity (years)

24-Jun-11 17-Jun-11

US
5.0 4.5 4.0 3.5
Yield (%) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

EU
2.5 2.3 2.0 1.8

Japan

Yield (%)

2.5 2.0 1.5 1.0 0.5 0.0 0 4 8 12 16 20 24 28 32

Yield (%)
0 5 10 15 20 25 30

3.0

1.5 1.3 1.0 0.8 0.5 0.3 0.0 0 4 8 12 16 20 24 28 32 36 40

Time to maturity (years)

01-Jul-11 24-Jun-11 17-Jun-11

Tim to m e aturity (years)

01-Jul-11 24-Jun-11 17-Jun-11

Time to maturity (years)

01-Jul-11 24-Jun-11 17-Jun-11

Source: Based on data from Bloomberg.

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2-versus-10 Yield Spread Chart

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Yield Spread between the Two- and Ten-Year Government Bonds

China, People's Rep. of
1-Jul-11

Hong Kong, China Indonesia Korea, Rep. of Malaysia Philippines Singapore Thailand Viet Nam U.S. E.U. Japan 0 50 100 150 200 basis points

24-Jun-11 17-Jun-11

250

300

Source: Based on data from Bloomberg LP.

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India

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Policy Rate versus Inflation Rate Charts

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China, Peoples Rep. of

10 8 6 5.50 4 2 2 0 0 -2 -4 Jan05 Inflation Rate -2 4 1-year Lending Rate 6.31 8

Hong Kong, China

12 10 HKMA Base Rate Inflation Rate 5.2 8 6 4 2 0 -2 Jan05 Repurchase Cut-off Yield

9.06 7.50

0.5

Inflation Rate

Sep05

Jun06

Feb07

Nov07

Aug08

Apr09

Jan10

Sep10

Jun11

-4 Jan05

Sep05

Jun06

Feb07

Nov07

Aug08

Apr09

Jan10

Sep10

Jun11

Sep05

Jun06

Feb07

Nov07

Aug08

Apr09

Jan10

Sep10

Jun11

PRC uses 1-year lending rate as one of its policy rates. Source: Bloomberg LP.

The Hong Kong Monetary Authority maintains a Discount Window Base Rate. Source: Bloomberg LP.

The Reserve Bank of India uses the repurchase (repo) cutoff yield as its policy rate. Source: Bloomberg LP.

Indonesia
20 18 16 6 14 12 10 8 6 4 2 0 Jan05 0 Jan05 Inflation Rate 6.75 5.54 2 4 7-Day Repo Rate 8

Korea, Republic of
10 8 6 Inflation Rate 4 4.40 3.25 2 0 -2 -4 Jan05

Malaysia

Overnight Policy Rate 3.30 3.00

Inflation Rate

Sep05

Jun06

Feb07

Nov07

Aug08

Apr09

Jan10

Sep10

Jun11

Sep05

Jun06

Feb07

Nov07

Aug08

Apr09

Jan10

Sep10

Jun11

Sep05

Jun06

Feb07

Nov07

Aug08

Apr09

Jan10

Sep10

Jun11

Bank Indonesia uses its reference interest rate (BI rate) as its policy rate. Source: Bloomberg LP.

The Bank of Korea shifted its policy rate from the overnight repurchase (repo) rate to the 7-day repo rate in March 2008. Source: Bloomberg LP.

Bank Negara Malaysia uses the overnight policy rate (OPR) as its policy rate. Source: Bloomberg LP.

Philippines
14 12 10 8 6 4.50 4 2 0 Jan05 4.50 0 -2 Overnight Reverse Repo Rate Inflation Rate 10 8 6 4 2

Thailand
30 27 24 Inflation Rate 4.06 3.00 21 18 1-Day Repo Rate 15 12 9 6 -4 -6 Jan05 3 0 Jan05 Prime Lending Rate

Viet Nam

Inflation Rate

20.82

9.00

Sep05

Jun06

Feb07

Nov07

Aug08

Apr09

Jan10

Sep10

Jun11

Sep05

Jun06

Feb07

Nov07

Aug08

Apr09

Jan10

Sep10

Jun11

Sep05

Jun06

Feb07

Nov07

Aug08

Apr09

Jan10

Sep10

Jun11

Bangko Sentral uses the Philippine overnight reverse repurchase agreement rate as one of its policy instruments. Source: Bloomberg LP.

The Bank of Thailand replaced the 14-day repurchase rate with the 1-day repurchase rate in January 2007 as its policy rate. Source: Bloomberg LP.

The State Bank of Viet Nam uses a benchmark prime lending rate as its policy rate. Source: Bloomberg LP.

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DEBT HIGHLIGHTS

.......

Credit Default Swap Spreads & Exchange Rate Indexes

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Credit Default Swap Spreads - Senior 5-year*

1,4 00
C h in a, P eo p le 's R ep . o f

H o n g K o n g , C h in a

1,2 00
In d o ne sia

K o rea, R ep . o f

1,0 00

Mid spread in basis points

Jap an

M al aysia

8 00
Ph ili p p in es

6 00

Th ai lan d

4 00

2 00

* In USD currency and based on sovereign bonds Source: Thomson Reuters

0 De c -0 7 Ma y-08 O c t-08 Ap r-09 Se p-0 9 Fe b-10 J ul-1 0 J an-1 1 J un -1 1

Exchange Rate Indexes (vis--vis US$, 2 January 2007=100)

130 13 0 C h in a, P eo p le 's R ep . of

In d o n esia 120 12 0 K o rea , R ep . o f

M al aysia 110 11 0 Ph il ip p in es

100

10 0

Th a ilan d

Sin g a po r e 90 90

Vie t N am

80

80

70

70

60

60

Source: ADB-OREI staff calculations based on Bloomberg data.

50 Jan -07 Au g -07 A p r-08 N o v -0 8 Ju l-09 M ar -10 O ct-10

50 Ju n -11

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DEBT HIGHLIGHTS
Amount Issued LCY Billions
2.00 28.40 9.00 4,762.98 1,200.00 1,040.00 800.00 0.50 0.20 0.50 0.50 1.00 0.20 2.00 1.50 2.03 3.90 2.20 10.23 15.39 12.88

.......

Selected Debt Security Issuances (27 June 1 July 2011)

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Markets Auction Date

PRC HK JP KR 28-Jun 28-Jun 29-Jun 27-Jun

Type of Security
1-year PBOC Bills 91-day Exchange Fund Bills 181-day Exchange Fund Bills 3-month Treasury Discount Bills 91-day Monetary Stabilization Bonds 1-year Monetary Stabilization Bonds 20-year Treasury Bonds 91-day BNM Islamic Notes 168-day BNM Notes 210-day BNM Notes 56-day BNM Islamic Notes 89-day BNM Notes 259-day BNM Notes 20-year Malaysian Government Securities 91-day Treasury Bills 364-day Treasury Bills 91-day Treasury Bills 2-year Government Bonds 28-day BOT Bills 91-day BOT Bills 182-day BOT Bills

Average Yield (%)

3.50 0.09 0.11 0.09 3.40 3.68 4.37 2.68 2.88 2.89 2.89 2.84 2.92 4.23 2.88 3.22 0.19 0.39 2.84 3.06 3.33

Coupon (in %)

Amount Offered LCY Billions

2.00 28.40 9.00 4,800.00 1,200.00 1,000.00 800.00 1.00 1.00 1.00 1.00 2.00 1.00 2.00 1.50 4.00 3.90 2.20 20.00 20.00 18.00

MY

27-Jun

29-Jun

PH SG TH

27-Jun 27-Jun 28-Jun 28-Jun

Sources:LocalmarketsourcesandBloomberg,LP.

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DEBT HIGHLIGHTS

.......

Selected Asia Data Releases (5 - 11 July 2011)

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Country/Variable
Malaysia Exports y-o-y% MAY Philippines Consumer Price Index y-o-y% JUN Singapore Purchasing Managers Index Index JUN Indonesia M2 Money Supply y-o-y% MAY Malaysia Overnight Policy Rate % JUL Japan M3 Money Supply y-o-y% JUN Republic of Korea Producer Price Index y-o-y % JUN Peoples Republic of China Exports y-o-y% JUN Peoples Republic of China Trade Balance USD billion JUN Peoples Republic of China M2 Money Supply y-o-y% JUN Malaysia Industrial Production y-o-y% MAY Malaysia Manufacturing Sales y-o-y% MAY Philippines M3 Money Supply y-o-y% MAY

Release Date
07/05

Historical Data
04/10: 05/10: 03/11: 04/11: 05/10: 06/10: 04/11: 05/11: 05/10: 06/10: 04/11: 05/11: 04/10: 05/10: 03/11: 04/11: 06/10: 07/10: 05/11: 06/11: 05/10: 06/10: 04/11: 05/11: 05/10: 06/10: 04/11: 05/11: 05/10: 06/10: 04/11: 05/11: 05/10: 06/10: 04/11: 05/11: 05/10: 06/10: 04/11: 05/11: 04/10: 05/10: 03/11: 04/11: 04/10: 05/10: 03/11: 04/11: 04/10: 05/10: 03/11: 04/11: 26.3% 21.3% 7.8% 11.1% 4.3% 4.0% 4.3% 4.5% 52.2 51.3 52.5 50.8 10.6% 11.2% 16.1% 15.1% 2.50% 2.50% 3.00% 3.00% 2.3% 2.2% 2.1% 2.1% 4.6% 4.6% 6.8% 6.2% 48.5% 43.9% 29.9% 19.4 % 19.5 20.0 11.4 13.1 21.0% 18.5% 15.3% 15.1% 11.4% 12.4% 2.9% 2.2% 20.1% 20.3% 14.1% 15.5% 12.5% 10.7% 10.3% 7.3%

Recent Trends
Malaysias export growth rose to 11.1% year-on-year (y-o-y) in April from 7.8% in March.

07/05

Consumer price inflation in the Philippines accelerated to 4.5% y-o-y in May from 4.3% in April.

07/05

Singapores purchasing managers index fell to 50.8 points in May from 52.5 in April.

07/07 to 07/13

Indonesias M2 money supply expanded 15.1% y-o-y in April after growing 16.1% in March.

07/07

Bank Negara Malaysia raised its overnight policy rate to 3.00% from 2.75% during its last Monetary Policy Committee meeting on 5 May.

07/08

Growth in Japans M3 money supply remained steady at 2.1% y-o-y in both April and May.

07/08

Producer prices in the Republic of Korea rose 6.2% y-o-y in May following a 6.8% increase in April.

07/10

Export growth in the Peoples Republic of China (PRC) fell to 19.4% y-o-y in May from 29.9% in April.

07/10

The PRC posted a trade surplus of USD13.1 billion in May, up from USD11.4 billion in April.

07/10

The growth of the PRCs M2 money supply fell slightly to 15.1% y-o-y in May from 15.3% in April due to monetary tightening measures implemented by the Peoples Bank of China.

07/11

Malaysias industrial production contracted 2.2% y-o-y in April following a 2.9% expansion in March.

07/11

Manufacturing sales in Malaysia rose 15.5% y-o-y in April, slightly higher than the 14.1% growth posted in March.

07/11

Growth in the Philippines M3 money supply eased to 7.3% y-o-y in April from 10.3% growth in March.

Source:AsianBondsOnline,BloombergLP,andReuters.

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DEBT HIGHLIGHTS

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News Articles: Sources for Further Reading

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Consumer Price Inflation Eases in Indonesia and Thailand, Rises in the Republic of Korea, Remains Unchanged in Japan Indonesia's June CPI Slows to 5.54 pct y/y, Above Forecast Reuters (01 July 2011) Consumer Price Index in June 2011 Statistics Korea (01 July 2011) June Inflation Up 4.06% Bangkok Post (01 July 2011) Japan May 2011, Ku-area of Tokyo June 2011 (preliminary) Ministry of Internal Affairs and Communications - Japan (01 July 2011) TABLE-Japan May Core CPI Rises 0.6 pct yr/yr Reuters (01 July 2011) Industrial Output Growth Increases in Japan, Republic of Korea, and Viet Nam, Slows in the Philippines and Falls in Thailand Indices of Industrial Production Ministry of Economy, Trade and Industry - Japan (29 June 2011) The Industrial Activities in May 2011 Statistics Korea (30 June 2011) Monthly Integrated Survey of Selected Industries - April 2011 National Statistics Office (28 June 2011) Manufacturing Down in May Bangkok Post (28 June 2011) Socio- Economic Statistics for First Half of 2011 General Statistics Office (01 July 2011)

Indonesia's Finance Ministry Forecasts a 2011 Budget Deficit Equal to 1.9%2.1% of GDP; Philippines Records PHP9.5 Billion Budget Deficit in JanuaryMay; Viet Nam's Budget Deficit Reaches VND27.8 Trillion in 1H11 Deficit Wont Pass 2.1% Despite Fuel Subsidy The Jakarta Post (28 June 2011) January to May Fiscal Deficit at P9.540 Billion Bureau of the Treasury (29 June 2011) Viet Nams Budget Deficit at 27.78Tr Dong at HI: MOF Reports Intellasia (01July 2011)

Malaysia Issues USD2.0 Billion Sukuk; Local Currency Sukuk Issuance from Telekom Malaysia, Antara Steel Mills, and Sabah Development Bank; Korea Eximbank Prices JPY80 Billion Samurai Press Release Wakala Global Sukuk Ministry of Finance Malaysia (29 June 2011) Telekom Makes Call IFR Asia (25 June 2011) Steel-tight Cover IFR Asia (25 June 2011) Sabah Devt Bank Taps Five-Year Funds at 4.43% IFR Asia (29 June 2011) Kexim Sets New Benchmark with Record Korean Samurai IFR Asia (28 June 2011)

PRCs Local Government Debt Reached CNY10.7 Trillion at end-2010 China's Local Government Debts Exceed 10t Yuan China Daily (27 June 2011) UPDATE: China Local Government Debt CNY10.7 Tln As Of End 2010 The Wall Street Journal (27June 2011)

Subordinated Debt, MTNs, and Commercial Paper Issuance in the PRC; Meralco Sells PHP5.0 Billion of Fixed-Rate Notes; Filinvest Land Offers PHP3 Billion Retail Bonds; Noble Development and Provincial Waterworks Authority Issues THB-Denominated Bonds; F&N Treasury Raises SGD50 Million from 7-Year Bond Sale ICBC Completes RMB38 Billion Sub-Debt Issuance Indonesia Today (01 July 2011) Guangdong Guangxin Issues Notes Today China Knowledge (29 June 2011) Jiangsu Beijing-Shanghai Expressway Issues Bills Today China Knowledge (29 June 2011) Manila Electric Company to Issue PHP5.0 Billion Fixed Rate Notes The Philippine Stock Exchange (29 June 2011) Filinvest Launches Ps3bn 5year at 6.19% IFR Asia (27 June 2011) Noble Development Hits Market With Bt1.5bn Three-Year Note IFR Asia (27 June 2011) New Issue - F&N Treasury Pte Ltd issues S$50 mln 7yr Bond Reuters (27 June 2011)

Trade Deficits in Hong Kong, China; Philippines; and Viet Nam; Trade Surpluses in Indonesia, Republic of Korea, and Thailand External Merchandise Trade Statistics for May 2011 Census and Statistics Department (28 June 2011) Indonesia Books US$3.51 Billion Export Surplus in May Bisnis Indonesia (01 July 2011) S. Koreas Trade Surplus Reaches US$3.3 Bln in June YONHAP News (01 June 2011) EXTERNAL TRADE PERFORMANCE April 2011Preliminary National Statistics Office (28 June 2011) Press Release on Economic and Monetary Conditions for May 2011 Bank of Thailand (30 June 2011) Socio- Economic Statistics for First Half of 2011 General Statistics Office (01 July 2011)

Republic of Korea Posts Current Account Surplus for 15th Straight Month in May; Viet Nams Economy Expands 5.6% in 1H11 Balance of Payments during May 2011 The Bank of Korea (28June 2011) South Koreas Current-Account Surplus Widens as Car Makers Boost Shipments Bloomberg (28June 2011) Socio- Economic Statistics for First Half of 2011 General Statistics Office (01July 2011)

PT Bank Permata Issues IDR1.75 Trillion of Subordinated Debt; Bank Tabungan Pensiunan Sells IDR500 Billion of Dual-Tranche Bonds; Bank Tabungan Negara Issues IDR1.3 Trillion of 10-Year Bonds Listing of Permata Bank Subordinated Bond II Year 2011, BTPN Bank Continuous Bond I With Fixed Interest Rate Phase I Year 2011, and BTN Bank Bond XV Year 2011 on June 30, 2011 Indonesia Stock Exchange (30 June 2011)

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