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Asian Bond Markets
Resilience of Asian Local Currency (LCY) Bonds – Strong issuance and growth despite difficult global
conditions in 2008 and 2009 with substantial growth in trading in 2010
– National reform and liberalization efforts are paying off– Regional efforts, such as ABMI and ABF, complement and
support national efforts
2Source: ABD/ABMI/ABMF
Asian Bond Markets - what is broken?
• Despite the efforts, inter-dependence of the region is low … Stronger regional cooperation is necessary.– Efforts of ASEAN Capital Market Forum (ACMF) could be
expanded to the Plus Three countries etc, may assist in facilitating integration of capital markets in the region.
– We need a policy framework to utilize knowledge and expertise in the region.
• The ABMI Group of Experts (GOE) was formed and found:– Cross-border bond transaction costs in ASEAN+3 region are
higher and vary significantly among the countries– Recommendations
• Assessments on feasibilities of Regional Settlement Intermediaries (RSI) to improve cross-border bond settlements.
• Recommendation to reduce market barriers.
3Source: ABD/ABMI/ABMF
4
Area of influence
Improve information flows in the marketsTimely information, uniform disclosure, price transparency, market statistics, information on corporate actions and legal information such as bankruptcy and insolvency laws.
Improve information flows in the marketsTimely information, uniform disclosure, price transparency, market statistics, information on corporate actions and legal information such as bankruptcy and insolvency laws.
Identification of Major Barriers (GOE)
Messaging format
Settlement cycle
Securities numberingPre -
matching
FX controlsconversion, repatriation
Taxes
Physical certificates
Investor registration
Omnibus accounts
Cash controlscredit balances, overdrafts
Nu
mb
er
of
mark
ets
in
volv
ed
More
Fe
wer
Private sector Public sector
Quotas
Source: ABD/ABMI/ABMF
5
What is important?Securities Markets
• Internationalisation to extend reach and attract foreign investment
• Increased liquidity and depth for all investors (domestic and international)
• A cost effective capital raising mechanism
Efficient markets always striving for
6
Market efficiency
– Sufficient regulation– Standards – High availability, security,
scalability– Low total cost of investing
including settlement – Straight Through Processing
(STP) automation– Operational efficiency of market
participants
Factors effecting market efficiency
7
Area of influence
Improve information flows in the marketsTimely information, uniform disclosure, price transparency, market statistics, information on corporate actions and legal information such as bankruptcy and insolvency laws.
Improve information flows in the marketsTimely information, uniform disclosure, price transparency, market statistics, information on corporate actions and legal information such as bankruptcy and insolvency laws.
Standardisation and agreed Market Practice can assist in solving some of these barriers
Settlement cycle
Securities numberingPre -
matching
FX controlsconversion, repatriation
Taxes
Physical certificates
Investor registration
Omnibus accounts
Cash controlscredit balances, overdrafts
Nu
mb
er
of
mark
ets
in
volv
ed
More
Fe
wer
Private sector Public sector
Quotas
Source: ABD/ABMI/ABMF
Harmonisation of market practices: SMPG process
8
Administration
www.smpg.info Publication
Review, discussion & refinement
Collate common elements, specify additional country
requirements, identify further opportunities for
harmonization
Analyze & document local practices
Securities Market Practice Group (SMPG)
National Market Practice Groups (NMPG)National Market Practice Groups (NMPG)
National Market Practice Groups (NMPG)
ABMFA similar process
9
Administration
http://asean3abmf.adb.org Publication
Review, discussion & refinement
Collate common elements, specify additional country
requirements, identify further opportunities for
harmonization
Analyze & document local practices
ABMF Sub-Forum 2
National Market Practice Groups (NMPG)National Market Practice Groups (NMPG)
National representatives
From… a country mindsetworth… from an institutional mindset
• Overcoming natural behavior:– My country market practices are better than the others
– Why would my country have to change?
– What X is saying is right but he is from country A so…
– Will this have an impact on my institution system.
– What is my national community going to think about me?
10
… to a regional mindset…
• Through– An open mind towards other market practices– Keeping open agenda hidden agenda– Regional focus– National empowerment and conviction– Trust in the facilitators
• Check list after each decision:– Is it best for the region?– Is it the most cost effective for most regional players?– Will it ease the life of all regional and global foreign investors?
11
… to a global mindset.
12
• Through– An interest in what the rest of the world is doing– Trust in the international experts– Participation to SMPG
• Open to feedback from SMPG• Publication on www.smpg.info
– Participation to ISO 20022 process
• Check list after each decision:– Is it in line with international practices? – If not, can we justify it?
All this…Acknowledging and accepting differences
KnowledgeMake sure all participants have the same level of
understanding
Language Make sure all participants have the time to talk
CultureMake sure all participants have the opportunity to
share their views (by written or orally)
13
SummaryFor such a process to work
14
Open your mind
Think RegionalThink global
Be structured
Reuse what already exists