NADI, FIJI (2 May 2019) — The 10 economies of the Association of Southeast Asian Nations plus the People’s Republic of China (PRC), Japan, and the Republic of Korea (ASEAN+3) are now better placed than they have ever been to withstand any global liquidity crunch given the steady development of local currency bond markets in the region over the last 20 years, experts from the Asian Development Bank (ADB) say.
There are currently around $12.7 trillion worth of local currency bonds in the region, close to the amount of euro-denominated bonds issued in the much longer-standing euro area, according to a new ADB publication released today, Good Practices For Developing a Local Currency Bond Market - Lessons from the ASEAN+3 Asian Bond Markets Initiative.
“The growth of local currency bond markets means companies can obtain local currency funding often for longer terms, avoiding the currency and maturity mismatches that exacerbated the Asian Financial Crisis,” said ADB Chief Economist Mr. Yasuyuki Sawada.
In the wake of the 1997–1998 Asian Financial Crisis, ASEAN+3 economies pledged to work together to develop their local bond markets so borrowers could avoid having to raise funds overseas.
Since December 2002, the ASEAN+3’s Asian Bond Markets Initiative, supported by ADB, has put in place bond market infrastructure including the institutionalized credit guarantee facility, centralized bond market information platform, standardized cross-border bond issuance framework, and linkages of cross-border payment and settlement systems.
The publication noted that Indonesia and Thailand have made concerted efforts to develop their markets, including the establishment of strong public debt management capacities. The Republic of Korea and Malaysia have developed bond markets that are deep and well balanced between the government and corporate segments. The PRC’s local currency bond market has become one of the largest in the world and still has room to grow.
ASEAN comprises Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Viet Nam.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region.