NRI Papers
No.82 November 1, 2004
  Development of the Asian Bond Markets and Business Opportunities  
Masato HIROSE,Takeshi MURAKAMI and Yutaro OKU
       In the ASEAN+3 countries (ten ASEAN countries, Japan, South Korea and China), strengthened efforts are being made to foster bond markets in each country. While the bond markets in each Asian country have been steadily growing in size with government bonds playing a central role, these markets face major bottlenecks in terms of tradability in the market due to factors such as a narrow investor base and a lack of active dealers.
        In addition to the efforts being made independently by each country, activities have been started to promote the growth of each bond market within the framework of regional cooperation. The Asian Bond Markets Initiative (ABMI) is one of such activities under the ASEAN+3 framework, and discussions are ongoing focusing on issues such as the establishment of guarantee mechanisms, the improvement of settlement systems and the development of securitization schemes.
       In the Asian bond markets that are expected to grow in the future, business opportunities for foreign companies are also expected to increase. For example, foreign companies operating in Asia can diversify financing sources by issuing bonds denominated in local currencies, while fund management companies can canalize individual financial assets in foreign countries by developing/commercializing fund products that include Asian bonds. In addition, foreign life insurance companies can enter into the Asian market and enrich the local institutional investor base.
Contents
I Factors Pushing Bond Market Development in Asia
  1 "Double Mismatches" in Currency and Maturity in Bank Debt
  2 Increasing Expectations towards Direct Financing
II Current Status of Asian Bond Markets
  1 Shifting to Open and Fair Competitive Markets
  2 Activities as Seen from the "Four-I" Perspectives
III Issues to Overcome in Developing the Bond Markets in Each Country
  1 Three Phases in Developing Bond Markets
  2 Overcoming a Vicious Circle Is Essential for Improving Liquidity
IV Joint Approaches by Each Country toward Fostering Bond Markets
  1 Asian Bond Fund
  2 Asian Bond Markets Initiative
V Business Opportunities for Companies and Financial Institutions

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