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Asian debt: Vietnam tests the water

The fate of Vietnam’s ambitious $1 billion bond deal will tell us much about bond investors’ real risk appetites.

Asia’s debt bankers were predicting as 2009 drew to a close that the start of this year would be busy and interesting. They were right. For years the Philippines has set the tone in Asian sovereign debt, issuing a benchmark note in January that tests investors’ appetite for ROPs – as the republic’s bonds are known – and for Asia sovereigns in general. Generally regarded among investors as Asia’s savviest frequent issuer, the Philippines enjoyed first-mover advantage on $1.5 billion of bonds sold in the first week of January, with both tranches of the deal heavily oversubscribed. Now comes the interesting part. Indonesia, Malaysia and Vietnam are all looking to tap the dollar debt market and will be hoping to enjoy the strong demand and tight pricing that the Philippines obtained. Whether they are able to do so will say much about the extent to which investors are distinguishing between the recovery stories of Asia’s disparate economies.

Indonesia and Vietnam sit at almost opposite ends of the risk spectrum for Asia’s sovereign debt. The former enjoys similar esteem to the Philippines thanks to the efforts of finance minister Sri Mulyani to improve transparency and borrowing habits.

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