The ASEAN+3 Asian Bond Market Initiative – Utilizing Savings for Growth

Monday, April 16, 2012

The high savings rate of Asian households and businesses looking to invest are aspects of Asia’s economy that will benefit the Asian Development Bank’s (ADB) ASEAN+3 Asian Bond Market Initiative (ABMI), an initiative to promote regional financial integration utilizing Asian savings to feed back into markets relinquishing capital for growth. With further integration and regulation, this initiative will rejuvenate the Asian bond market creating a more efficient and liquid market in Asia.

The 2012 report by the ADB, The ASEAN+3 Bond Market Guide available here which was approved at the 13th ASEAN+3 Finance Ministers’ Meeting in May 2010 in Tashkent, Uzbekistan relayed that Asian bonds have remained a strong investment for global investors with only a dampening effect resulting from the Global Financial Crisis.

 

The report detailed the latest proportions of investment in East Asia’s local currency bonds (LCY) which grew by 16.2% and 13.6% in 2009 and 2010 to reach US$5.2 trillion in 2010. In 2010, the total amount of bonds for East Asia was at 8% globally, thus overtaking and forging ahead of the United Kingdom (2.5%) and Germany (4%).

 

This growth is predicted to continue as regulations are improved that will make investing savings back into the Asian Bond Market a useful tool for transferring savings into a relatively safe investment, with lower returns but increased safety compared to investing in stocks. The stability of bonds counter fluctuations that commonly cause havoc on stock prices will be a major enticement for cautious investors who are looking to earn gains.

 
The ASEAN+3 Bond Market Guide
is a channel for the ASEAN+3 bond markets which calls to promote harmonious regulation and market procedures. The ABMI created 4 working groups to work through issues with the Asian Bond Market including:

-  Creating new securitized debt instruments (Thailand)

-  Credit guarantee and investment mechanisms (Korea and China)

-  Foreign exchange transactions and settlement issues (Malaysia)

-  Rating Systems (Singapore and Japan)

 

The ADMI will continue to support the growth of Asian bond markets – allowing savings to be recycled back into markets – renewing growth and development.