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Developing Asian Bondmarkets

Developing Asian Bondmarkets

Takatoshi Ito
Yung Chul Park
Copyright Date: 2013
Published by: ANU Press
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  • Book Info
    Developing Asian Bondmarkets
    Book Description:

    The absence of vibrant bondmarkets in East Asia was a significant contributor to the 1997–98 financial crisis. Ever since, the development of local bondmarkets has been a major objective of financial reforms in many East Asian economies. This effort has been frustrated by the inability to reach a consensus on whether Asian bondmarkets are truly needed in East Asia, whether they can be made viable in the competitive environment of the global economy, how they should be created and what role intergovernmental cooperation should play in their definition and creation. Developing Asian Bondmarkets helps build this consensus, proposing how to develop robust and efficient bondmarkets in East Asia. This book, the first of its kind, comes from the Finance Forum of the Pacific Economic Cooperation Council.

    eISBN: 978-1-925021-40-0
    Subjects: Finance

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-v)
  3. Tables
    (pp. vi-vii)
  4. Figures
    (pp. vii-vii)
  5. Abbreviations
    (pp. viii-viii)
  6. Contributors
    (pp. ix-xii)
  7. Foreword
    (pp. xiii-xiv)
    Soogil Young

    This volume is a collection of the papers submitted to the second annual conference of the Finance Forum of the Pacific Economic Cooperation Council. The papers have been edited after the conference so that they collectively complement each other in providing important information on Asian bonds.

    The Standing Committee of the Pacific Economic Cooperation Council (PECC) agreed to create the Finance Forum at its meeting held in Hong Kong in November 2001, as part of the effort to realign its various existing task forces. With this decision, cooperation for financial stability and development in the APEC region finally came to...

  8. 1 Overview Challenges and strategies
    (pp. 1-15)
    Takatoshi Ito and Yung Chul Park

    Asian bonds are the interest-bearing obligations of Asian governments, corporations or financial institutions, wherever they are marketed or in whatever currency they are denominated. Asian bonds are defined by the residence of the issuer. But, many advocates and policymakers presume that Asian bonds will be denominated in Asian currencies. A regional bondmarket in Asia would be primarily defined as bringing together issuers and investors from Asia. The ASEAN+3 Finance Ministers’ process has established six working groups to tackle issues considered obstacles in promoting the Asian bondmarket under the banner of the Asian Bond Markets Initiative.

    One of the lessons from...

  9. 2 Creating regional bondmarkets in East Asia: rationale and strategy
    (pp. 16-66)
    Yung-Chul Park and Daekeun Park

    Of all probable structural weaknesses, the absence of vibrant bondmarkets never fails to make the long list of the causes of the 1997–98 East Asian financial crisis. A year after the financial crisis, Donald Tsang, financial secretary of Hong Kong SAR, cited the failure to establish a strong and robust Asian bondmarket as one of the reasons for the financial turmoil in East Asia, asking ‘how is it that we in Asia have never been able to replicate the Eurobond market success in this part of the world?’(Tsang 1998). International financial institutions such as the International Monetary Fund (IMF)...

  10. 3 Promoting Asian basket currency bonds
    (pp. 67-89)
    Takatoshi Ito

    With many Asian countries experiencing robust growth since 1999, the East Asian currency crisis of 1997–98 seems to be just a distant memory. However, just when you think you are in safe waters, perils may sneak up on you again. Some countries, such as Thailand and Indonesia, are experiencing strong capital inflows and the currencies may be appreciating beyond levels that might be justified by the fundamentals.

    Many of the recommendations that were identified after the crisis have not been implemented. Three of these recommendations are examined in this chapter.

    Reduce vulnerability to avoid the double mismatch problem, namely...

  11. 4 Institutional foundations: Credit insurers, asset-backed securitisation corporations and Asian bond funds
    (pp. 90-111)
    Michael Chak Sham Wong and Richard Yan Ki Ho

    For the past few years, Asian governments have undertaken a range of measures to develop domestic bondmarkets, including issuing government securities, encouraging financial institutions to invest in marketable debt securities, implementing legal reforms for debt securities issuances, building infrastructure for bond trading and clearing, and establishing credit guarantee mechanisms. These measures are aimed at achieving financial disintermediation in national economies and diversifying the sources of public and private sector funding. While many arguments have been made as to the causes of the East Asian financial crisis, it is generally agreed that one fundamental cause was the global banks’ collective withdrawal...

  12. 5 The structure and characteristics of East Asian bondmarkets
    (pp. 112-128)
    S.Ghon Rhee

    The definition of the term ‘East Asian bondmarkets’ is elusive at best, and so it must be asked, ‘What is a regional bondmarket?’ This question, in turn, raises a series of related questions.

    Is this a market geographically confined to the East Asian region?

    Do issuers, buyers, underwriters and market makers all come from the same region?

    Are regional bonds to be denominated in one of Asia’s currencies or in a basket of Asian currencies?

    If they are denominated in the US dollar or the euro, are they still classified as regional bonds?

    Do we expect regional bonds to be...

  13. 6 The role of securitisation and credit guarantees
    (pp. 129-144)
    Hung Q. Tran and Jorge Roldos

    A key policy prescription for the prevention or amelioration of financial crises in emerging markets is the development of local bondmarkets, a strategy that has been embraced by a number of policymakers and international organisations (see World Bank and International Monetary Fund 2001, 2003). From a macroeconomic perspective, local bondmarkets can soften the impact of lost access to international capital markets or bank credit by providing an alternative source of funding.¹ From a microeconomic perspective, they can help create a wider menu of instruments to deal with inherent currency and maturity mismatches in emerging markets (see Eichengreen and Hausmann 1999,...

  14. 7 The Asian Bond Bank: A good idea for credit enhancement
    (pp. 145-159)
    S. Ghon Rhee and Gregory R. Stone

    The rate of interest paid by borrowers is dependent upon the structure of the loan and the creditworthiness of the borrower. The structure of the loan is often determined endogenously, whereas the credit rating tends to be determined exogenously. Several methods of enhancing credit ratings exist. This chapter discusses one of the most frequently overlooked methods, the bond bank.

    Municipal bond banks first appeared in Canada in 1956 and in the United States in 1970 for the express purpose of lowering the cost of debt for municipalities. Since that time, municipal bond banks have been offering a unique and advantageous...

  15. References
    (pp. 160-166)
  16. Index
    (pp. 167-178)