Asian bond markets: Issues and prospects (BIS Papers, Number 30)

Asian bond markets: issues and prospects......Page 1
List of participants and authors from Korea......Page 3
List of participants and authors from outside Korea......Page 5
Contents......Page 8
1. The problem......Page 10
2. The policy response......Page 11
3. Dilemmas......Page 13
4. The papers that follow......Page 16
References......Page 20
Why is a regional bond market so important?......Page 22
Future challenges......Page 23
Conclusion......Page 24
Asian financial cooperation as seen from Europe......Page 25
Developing the bond market(s) of East Asia: global, regional or national?......Page 28
1. Defining terms......Page 29
Global bond market integration with few currencies......Page 30
Global bond market integration with many currencies......Page 33
Regional issuers in regional currencies: Europe versus Asia......Page 34
Regional elements in international bond markets......Page 36
A regional bias in investment in US dollar bonds issued by Asian borrowers?......Page 37
Regional bond market: a summary......Page 38
4. National bond markets......Page 41
Policies for the global bond market......Page 43
Policies for domestic bond markets......Page 44
6. Conclusions......Page 45
References......Page 46
1. Introduction......Page 49
2. Overview......Page 51
3. Hypotheses......Page 52
Economic size......Page 53
Geographical/disease endowments......Page 54
Banking concentration......Page 55
Exchange rate regime......Page 56
5. Multivariate analysis......Page 57
6. Adding fiscal policy......Page 60
7. Conclusions......Page 62
Interbank interest rates......Page 63
Other variables......Page 64
Tables......Page 66
Figures......Page 77
References......Page 85
1. ABF origin and objectives......Page 87
3. Conclusions......Page 88
On the Asian bond market: comments on  Barry Eichengreen and Pipat Luengnaruemitchai’s paper  “Why doesn’t Asia have bigger bond markets?”......Page 89
Consolidating the public debt markets of Asia......Page 91
1. The choice of sterilisation instrument......Page 92
2. Overfunding the fiscal deficit to transform central bank debt......Page 94
3.1 Size and liquidity in government bond markets......Page 96
3.2 Prospective increase in the size of government bond markets in East Asia......Page 99
3.3 Monetary policy operations and the repo market......Page 101
4.1 The reluctance of the ministry of finance......Page 102
4.2 The reaction of the rating agencies......Page 103
4.4 The duration of the additional government securities......Page 104
4.5 Reconciliation with the budgetary policy......Page 105
References......Page 106
Comments on McCauley’s paper  “Consolidating the public debt markets of Asia”......Page 108
Lunch address......Page 110
1. Introduction......Page 111
2.1 Basic bond holdings data......Page 112
2.2 Measuring property rights protection......Page 113
3.3 Top 10 country breakdown......Page 114
3.4 Rule of law breakdown of bond investment......Page 115
Table 3......Page 116
4.1 Summary statistics of the regression sample......Page 127
4.2 Baseline regressions......Page 131
4.3 Robustness tests......Page 133
6. References......Page 136
About the data......Page 138
Government issuance has led the way for local bond market development......Page 139
Size matters and Asia has it: domestic corporate bond markets have grown considerably......Page 140
Other characteristics of Asian corporate local bond issuance: maturity, size, sectors......Page 141
Thoughts about the demand side of the market......Page 142
Charts......Page 146
References......Page 151
Brief historical background......Page 152
Japan’s domestic bond market......Page 153
The Samurai bond market......Page 156
The euroyen market......Page 160
Other structures: Shoguns, Daimyos, globals and the MTN market......Page 161
The retail market: the Uridashi......Page 165
Current issues......Page 166
 Annex 1: The Japanese market for Asian equities......Page 168
 Annex 2: Issuance in various Japanese yen market segments......Page 169
Annex 3: Samurai and euroyen defaults......Page 174
Bibliography......Page 175
Annex 4: Bond structures in the liberalisation of Japan’s capital market: from Samurai via Shogun and Daimyo to euro with Uridashi and global......Page 176
2. Business conflicts (business territorial disputes) and market competition......Page 177
3. Currency constraints......Page 179
Recent development of the Korean bond market......Page 180
Introduction......Page 183
What might drive the rating gap?......Page 184
Differences among the rating agencies......Page 185
Previous literature......Page 186
Methodology......Page 187
Rating regressions......Page 188
Rating gap regressions......Page 189
Conclusion......Page 190
Tables......Page 191
References......Page 208
Comments on Kate Kisselev and Frank Packer’s paper “Minding the gap in Asia: foreign and local currency ratings”......Page 209
1. Introduction......Page 211
2.1 Cross-border securities settlement in Asia......Page 213
2.2.1 Limits of using an international central securities depository (ICSD)......Page 215
2.2.2 The need to create a regional clearing and settlement system......Page 216
2.3.1 Model I: Bilateral linkages between NCSDs for cross-border settlements......Page 218
2.3.2 Model II: Building a regional ICSD - AsiaSettle......Page 219
3.1.2 Global credit rating agencies in Asia......Page 223
3.1.3 Association of Credit Rating Agencies in Asia (ACRAA)......Page 224
3.2 The need for a regional credit rating agency......Page 225
3.3 Standardisation for introducing a regional credit rating system......Page 227
4. Conclusion......Page 228
References......Page 230
Comments on Daekeun Park and Changyong Rhee’s paper “Building infrastructure for the Asian bond markets: settlement and credit rating”......Page 231
1. Introduction......Page 233
A. ASEAN+3: Asian Bond Market Initiative (ABMI)......Page 234
1. ABF 1: the critical first step......Page 235
2. ABF2: the bold new second phase......Page 236
A. Overview of the Asian bond markets......Page 238
B. Factors hindering development of an Asian bond market......Page 240
B. Example using credit guarantees and securitisation......Page 241
2. Private guarantee companies......Page 243
4. The experience of ASIA Ltd......Page 244
A. Attributes of a regional guarantee institution......Page 245
1. Business strategy......Page 246
2. Type of institutional form......Page 247
6. Conclusion......Page 248
References......Page 249
Comments on Oh and Park’s paper “ASEAN+3 regional guarantee mechanism”......Page 250
Recent developments in the Asian bond market......Page 252
Concluding remarks......Page 253
1. Introduction......Page 255
2.1 Benefits to local bond market......Page 257
2.2 Benefits to foreign investors and issuers......Page 258
Capital controls......Page 259
Taxation......Page 262
Clearing and settlement of bonds......Page 263
3.2 Impediments to foreign issuer participation in local bond markets......Page 265
4.1 Regional cooperation......Page 266
References......Page 267
The current state and future potential of Asian derivatives markets......Page 270
FX derivatives......Page 271
Singapore......Page 272
Malaysia......Page 273
India......Page 274
Singapore......Page 277
Malaysia......Page 278
India......Page 279
Singapore......Page 280
Korea......Page 281
Thailand......Page 282
Indonesia......Page 283
China......Page 284
Credit derivatives......Page 287
Conclusion......Page 289
References......Page 290
1. Hedging volumes and market factors......Page 291
3. Conclusions......Page 292
1. Executive summary......Page 293
3. Definitions......Page 294
1.3 Central counterparty......Page 296
1.5 Rationalisation/integration/consolidation: public or private initiatives?......Page 297
2.2 United States......Page 298
2.4 Asia......Page 299
3.1 Introduction......Page 300
3.3.2 ESCB/CESR report (European System of Central Banks/Committee of EuropeanSecurities Regulators)......Page 301
1.1 Introduction......Page 302
1.3.1 Market risk......Page 303
1.3.4 Operational/custody risk......Page 304
2.1 Introduction......Page 305
Foreign investor restrictions......Page 306
2.3 Current clearing and settlement infrastructure in Asia......Page 307
2.4 Risk reviews of the selected Asian central depositories......Page 308
Regulations and governance rules covering central depository activity......Page 309
The liabilities assumed by central securities depositories......Page 310
The asset segregation policies of the depository system......Page 311
The compliance monitoring process......Page 312
Guarantee funds......Page 313
Functionality......Page 314
The establishment of business recovery plans......Page 315
2.4.6 Conclusion......Page 316
2.5 Possible future central securities depository models for Asia......Page 319
Advantages......Page 320
2.5.5 Conclusion......Page 321
 Annex 1: European clearing and settlement environment......Page 323
 Annex 2: G30 recommendations......Page 324
 Annex 3: CPSS/IOSCO recommendations......Page 326
Annex 4: CSDs/CCPs and payment systems in Asia......Page 328
China: China Securities Depository and Clearing Corporation Ltd (CSDCC)......Page 333
India: National Securities Depository Limited (NSDL)......Page 334
India: Reserve Bank of India (RBI)......Page 335
Japan: Bank of Japan (BOJ)......Page 336
Korea: Korea Securities Depository (KSD)......Page 337
Philippines: Bureau of Treasury (BTR)......Page 338
Taiwan: Taiwan Securities Central Depository (TSCD)......Page 339
Thailand: Thailand Securities Depository Co Limited (TSCD)......Page 340
Selected bibliography......Page 341
1. Differences in Asian clearing and settlement systems......Page 342
3. Conclusions......Page 343
Executive summary......Page 344
Defining regulation......Page 345
Prudential regulation......Page 346
Foreign access......Page 347
Issuance restrictions......Page 348
Hedging instruments......Page 349
Taxation......Page 350
Prudential regulation and local bond markets......Page 351
Legal and accounting standards......Page 353
IOSCO principles of securities regulation......Page 354
Principles for the regulator, self-regulation, enforcement and cooperation......Page 356
Principles for market intermediaries and the secondary market......Page 358
Conclusion......Page 359
References......Page 360
Yung Chul Park: questions to be analysed......Page 362
Tom Byrne......Page 363
3. What could ASEAN+3 do to develop deep and regional bond markets in Asia?......Page 364
Robert N McCauley......Page 366