Going Regional: How to Deepen ASEAN's Financial Markets | Asian Development Bank

Going Regional: How to Deepen ASEAN's Financial Markets

Publication | January 2012
Going Regional: How to Deepen ASEAN's Financial Markets

This paper examines key issues to further develop the financial markets in the Association of Southeast Asian Nations (ASEAN) and ASEAN+3 countries.

This study identifies the key issues involved in the further development and deepening of financial markets in the Association of Southeast Asian Nations (ASEAN).1 For the smaller ASEAN countries, the first priority is the development of the banking system. In the larger ASEAN+3 economies,2 banking systems are already reasonably well-developed, while stock markets and government bond markets have evidently achieved critical mass even while remaining purely domestic markets. The tug-of-war between the geography of information in the direction of more localized markets versus the critical mass required by network externalities makes the case for regional integration stronger for corporate bond markets than for other financial markets. The study proposes three bold initiatives to develop a deep and liquid regional corporate bond market.


1 ASEAN includes Brunei Darussalam, Cambodia, Indonesia, the Lao People's Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam.
2 ASEAN+3 economies include ASEAN countries plus, the People's Republic of China, Japan, and the Republic of Korea.

Contents 

  • Introduction
  • The Recycling of Savings
  • The Downside of Capital Mobility
  • The Role of Capital Controls
  • Financial Market Development in ASEAN Countries
  • Why Regional Instead of Global? The Tug-of-War between the Geography of Information and Network Externalities
  • The Way Forward