Development bank simplifies bond markets for the buy-side

A new ASEAN+3 Bond Market Guide aims to provide the buy-side with comprehensive information on Asia’s bond markets and harmonise standards and practices with a view to common bond issuance.

As global fixed income becomes an increasing focus of institutional investors, a newly-released ASEAN+3 Bond Market Guide aims to provide the buy-side with comprehensive information on Asia’s bond markets, with a broader aim of harmonising standards and practices and a view to common bond issuance in the future.

The two-volume guide, which covers regulations and practices in eleven markets – China, Hong Kong, Indonesia, Japan, Lao, Malaysia, Philippines, Singapore, South Korea, Thailand and Vietnam – was issued collaboratively by the Asian Development Bank (ADB) and the ASEAN+3 Bond Market Forum (ABMF).

Through the guide, it is now possible to know the exact differences and similarities that exist in the cross border bond market. This will help the ABMF synchronise and standardise the differences, which will increase the attractiveness of the regional bond market.

According to Seung Jae Lee, a principal financial sector specialist at the ADB, in the coming months, the ABMF will visit Asian buy-side traders to carry out close consultation on how we can develop a common bond issuance program. It is also targeting a pilot multi-location bond issuance program for late 2013.

“Because of consumer protection issues, it would be difficult to target common bonds for the public market, so it will be focused on qualified investors first,” said Lee.

Wider aims of the program include both recycling Asian savings into Asian bonds and attracting global capital into the region.

“In previous decades, significant developments have taken place in local currency bond markets, but intra-regional financial flows remained relatively small,” the ABMF said in a statement. “A more active intra-regional bond market would help channel regional resources to regional investments, leading to sustained and balanced economic growth.”

The size of the outstanding Asian bond market in 3Q11 ranged from the US$17 billion of Vietnam – the smallest but fastest growing in terms of issuance – to US$12.63 trillion in heavily-indebted Japan.

The country reports, some of which run to hundreds of pages, along with a second volume, are available on the ABMF website. There is also an Asian Bonds Online website hosted by the ADB which contains regularly-updated news on regional bond issues, as well as the guide.

The ABMF grew out of the Asian Bond Market Initiative (ABMI), itself a program that emerged from the ASEAN+3 finance ministers’ meetings.

“The government officials of the ABMI, which was launched in 2003, realised there was a need to involve the private sector in consultations,” Lee told

The ABMF now consists of public and private sector experts, including self-regulatory organisations, depository and exchange institutions, market associations of the ASEAN+3 and global market players.

“The ABMF, formed in September 2010, created an opportunity for the private sector and government officials to network and exchange information. The result of the one-and-a-half years of discussion is this guide,” explained Lee, adding the guide – aimed at buy-side traders – was getting good feedback from market participants.

“We found there was still information asymmetry in that some investors complained there was a lack of clear information on regulations across the region,” said Lee. “This market guide should enhance knowledge and induce more capital flows into the market.”