The Asian financial crisis (AFC) of 1997-1998 underlined the important role that local currency (LCY) bond markets can play in the region's financial stability. LCY bonds help mitigate the maturity and currency mismatch that contributed to the AFC, and add to a more diverse and balanced financial system. They are also a vital source of financing for infrastructure and other long-term developmental priorities. Since the launch of Asian Bond Markets Initiative (ABMI) in December 2002, most ASEAN member states witnessed rapid expansion of their LCY bond markets. The aggregated LCY bond markets of six major ASEAN member states increased from US$270 billion in December 2002 to US$1,187 billion in June 2017. The rapid growth of bond markets helps to strengthen resilience of ASEAN economies to external shocks.
Despite policy makers' efforts to foster broader, deeper and more liquid domestic bond markets, many ASEAN bond markets still face the challenge of relatively small and concentrated investor bases, which is partially due to limited regional financial integration. Active investor participation and well-balanced investor profiles promote market liquidity and help stabilise financial markets in case of external shocks. Different types of investors adopt different trading strategies and provide diversified demands for assets in the market due to divergent investment mandates and heterogenous risk aversion levels. Hence, broader investor profiles contribute to greater market depth and enhance market resilience to risks.
In 2017, the Asian Development Bank (ADB) study titled, Foreign and Domestic Investments in Global Bond Markets, examined determinants of foreign and domestic investors' portfolio choices in global bond markets. The study found that foreign investors significantly overweigh bond markets that have higher but less volatile returns on bond market indexes. In contrast, domestic investors are not sensitive to the risk-return profiles of domestic bond markets. This evidence reveals significant differences in the investment motives and trading patterns of foreign and domestic bond market participants. Moreover, there is clear evidence that foreign participation is shaped by sovereign ratings and capital market openness.
The study's findings give rise to policy implications. While higher foreign participation into domestic bond markets signals better risk-return profile as well as sound economic fundamentals, policy makers could encourage greater participation of domestic institutions, which would add to market depth and act as a buffer during external shocks.
During this roundtable, we will discuss the drivers of foreign and domestic investment in global bond markets, policies that may promote domestic participation, benefits of regional market integration, and how these discussions can be extended to the entire region for more integrated ASEAN bond markets.
SPEAKERS |
Dr. Donghyun Park Principal Economist, Economic Research and Regional Cooperation Asian Development Bank |
Dr. Shu Tian Economist, Economic Research and Regional Cooperation Department Asian Development Bank |
Mr. Kamarudin Hashim Executive Director, Market and Corporate Supervision, Securities Commission Malaysia |
Datuk Chung Chee Leong Chief Executive Officer, Cagamas Berhad |
Ms. Munirah Khairuddin Chief Executive Officer, CIMB-Principal Asset Management Berhad |
Dr. Joseph E. Zveglich Jr. Director, Asian Development Bank |
CHAIR |
Dr. Joseph E. Zveglich Jr. Chairman, CIMB ASEAN Research Institute President, ASEAN Business Club |
- 13.00 – 13.30
- Registration
- 13.30 – 13.40
Opening Speech
Dr.Pakorn Peetathawatchai, President, The Stock Exchange of Thailand
- 13.00 – 13.30
- Fixed Income Securities: An Alternative Investment
- Government Bonds
- Corporate Bonds
Mr.Tada Phutthitada, President, ThaiBMA
- 14.25 – 14.55
Asia Bond Monitor
Dr. Donghyun Park and Dr. Shu Tian
- 14.55 – 15.15
- Coffee Break
- 15.15 – 16.30
- Round Table Discussion: “Portfolio Diversification through Fixed Income Assets”
- Corporate Bonds
- Fixed Income Fund
- Asian Bond Fund
- Infrastructure Fund, Property Fund and REITs
Panel:
Mr. Peerapong Jirasevijinda Chief Executive Officer, BBLAM (TBC),
Mr. Vasin Vanichvoranun Executive Chairman, KAsset (TBC), and
PhD.Win Udomrachtavanich Chief Executive Officer, KTBST (TBC)
Moderator: Ms. Worawan Tinala, Money Chanel