ADB Warns (Again) on Rising Risks!

More example of what  I call as:  global political or mainstream institutions or establishments, CANNOT deny the existence of bubbles anymore. So their recourse has been to either downplay on the risks or put an escape clause to exonerate them when risks transforms into reality

I posted that the Asian Development Bank issued a sugarcoated and timid warning on the risk environment last September. 

TODAY, again the ADB discreetly raise the issue of RISING debt loads in the face of GROWING risk in their press release of ADB's Asia's Quarterly bond report: (bold mine)

Emerging East Asia’s local currency bond markets are resilient but a faster-than-expected US interest rate hike and a stronger dollar could pose problems, says the Asian Development Bank’s (ADB) latest Asia Bond Monitor.

“Higher US rates and a stronger dollar could prove to be a challenge given increased foreign holdings of Asia’s bonds, which could easily reverse, and record US dollar bond issuance by the region’s companies,” said Iwan J. Azis, head of ADB’s Office of Regional Economic Integration.

US dollar debt becomes more expensive to service in local currency terms when the dollar appreciates.

The quarterly report notes other challenges from tightening liquidity in the region’s corporate bond markets as Basel III requirements deter banks from holding large bond inventories, and a weaker property market in the People’s Republic of China (PRC), given many property developers there are highly indebted.

Markets are currently anticipating that the US Federal Reserve will increase interest rates in June 2015 but recent economic data suggest the economy is improving faster than anticipated. The US dollar, meanwhile, has appreciated against most emerging East Asian currencies recently, and monetary tightening would likely see it rise further. The Korean won has depreciated the most, falling 5.7% versus the US dollar between 1 July and 31 October.

Foreign holdings remained stable in most of emerging East Asia in the third quarter of the year although they ticked up in Malaysia and hit record highs in Indonesia. At the end of June, the share of foreign investment in Malaysia’s government bonds was 32.0% versus 30.8% at the end of March. In Indonesia, foreign investors held 37.3% of outstanding sovereign bonds at the end of September, up from 35.7% at the end of June.

Translation for the last paragraph: Beware the precipitate change of sentiment that could result to a portfolio foreign exodus stampede 

Rising Risk as emerging Asia’s Debt Balloons:

Despite the risks, emerging East Asia’s local currency bond markets continue to expand. By 30 September, there were $8.2 trillion in such bonds outstanding, 3.1% higher than at the end of June and 11.3% more than a year earlier. The fastest-growing markets on a quarterly basis were Singapore, the PRC, and Indonesia.

As I previously noted: So the ADB reluctantly joins the "warning" chorus, most probably intended as an escape outlet. So if a black swan event happens the ADB can easily say, see "I warned about this"!

As Aldous Huxley once warned: Facts do not cease to exist because they are ignored