Asian Govts Should Develop Local Currency Bond Markets Further: ADB

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Tuesday, the Asian Development Bank said that governments in Asia should continue to develop their domestic bond markets, and the bank was willing to support those efforts.

Speaking at the opening of the fourth annual Asian Bond Markets Summit in Singapore, Bindu Lohani, ADB's Vice President of Finance and Administration said, "Our aim should be to better balance financial intermediation at home - improving returns on domestic assets rather than locking excessive amounts in low-yielding assets abroad". The summit was organized by the ADB in association with the Asset Magazine.

Lohani said measures would have to be taken to encourage institutional and foreign investors to buy Asia's bonds, as also improve the the regulatory and policy frameworks, so that investors feel comfortable investing in the region.

The ADB official noted that domestic market reforms supported by regional cooperation initiatives have already started to bear fruit, giving borrowers and investors much more choice than they had 10 years ago. However, there was much more to do, he said.

"Robust local capital markets are essential to diversify the sources of funding necessary to support long-term investments and sustain high growth levels. This is not easy and it will take time", Lohani noted.

The official said the ADB was in talks with Asian economies to include more currencies in the US$10 billion Asian Currency Note Program that ADB established in September 2006. The program is the first regional platform dedicated to issuance of medium-term note issuance in local currencies, Lohani said.

Meanwhile, the ADB pointed out the increasing role of local currency bonds as a source of funds for companies and governments, in the form of the recent support to economic stimulus packages and for market reforms. The ADB in its November issue of Asia Bond Monitor said the outstanding local currency bonds in emerging East Asia stood at $4.2 trillion at the end of September, up 14.8% year-on-year, and eight times that seen in 1996, when the Asian financial crisis took place.

"The increase in emerging East Asia's outstanding bonds---is testament to the hard work of the region's governments and regulatory authorities in opening up their markets with an eye to building a regional debt market" Jong-Wha Lee, ADB's Chief Economist of ADB said.

"While the gains are impressive, governments must continue efforts to develop their markets further", the ADB added.

(Market News Provided by RTTNews)