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Asia, ADB Should Work Together to Develop Local Currency Bond Markets
MANILA, PHILIPPINES - Governments in Asia should continue to develop their domestic bond markets and the Asian Development Bank (ADB) stands ready to support those efforts, said Bindu Lohani, ADB's Vice-President of Finance and Administration.
Speaking at the opening of the fourth annual Asian Bond Markets Summit in Singapore today, Mr. Lohani said, "Our aim should be to better balance financial intermediation at home – improving returns on domestic assets rather than locking excessive amounts in low-yielding assets abroad." The summit was organized by ADB in association with The Asset magazine.
He pointed to the need to increase issuance of local currency bonds, take measures to encourage institutional and foreign investors to buy Asia's bonds and to improve regulatory and policy frameworks so investors are comfortable investing in the region's markets.
For its part, ADB has completed many groundbreaking issues since 1970 when it sold its first Samurai bonds in Japan. Its issuance in the local markets in Australia; the People's Republic of China; India; Republic of Korea; Malaysia; the Philippines; Taipei,China; and Thailand have helped lead the way for others to follow.
Benchmark issues by the Triple-A rated ADB can set a pricing yardstick for other borrowers who can also use similar structuring mechanisms to sell their own deals in the local markets. At the same time, the ADB bonds provide additional variety for local bond investors.
Mr. Lohani said ADB is also holding discussions with a number of Asian countries to include more currencies in the $10 billion Asian Currency Note Program that ADB established in September 2006. The program is the first regional platform dedicated to issuance of medium-term note issuance in local currencies.
Domestic market reforms supported by regional cooperation initiatives have already started to bear fruit, giving borrowers and investors much more choice than they had 10 years ago. However, developing Asian economies need to do more.
"Robust local capital markets are essential to diversify the sources of funding necessary to support long-term investments and sustain high growth levels. This is not easy and it will take time. But we hope that - together - we can achieve these goals," he said.