The Asian Development Bank (ADB) has said that the local currency (LCY) bond market of emerging East Asia (EEA) has risen from approximately $1 trillion in 2001 to $5.7 trillion as of end 2011.
In its latest Report issued on Friday, ADB said the total LCY bonds outstanding in EEA at the end of September 2011 were approximately 8.1 per cent of the global bond market against 2.1 per cent in 1996.
It said the domestic corporate bond market has been the growth driver for the EEA LCY bond market as a whole over the past few years and accounts for about a third of total bonds outstanding in the region. The largest LCY bond market in EEA is the People’s Republic of China with $3.4 trillion in bonds outstanding at end 2011.
The Republic of Korea, Malaysia, and Thailand had the most liquid government bond markets – as measured by quarterly turnover ratios – at the end of 2011.
The Bank further said to mitigate against the risks associated with the sudden reversal of capital inflows, and to minimize the currency and maturity mismatches, ASEAN+3 governments launched the ASEAN+3 Asian Bond Market Initiative in 2002 to foster the development of local currency bond markets.ASEAN+3, with an ADB contribution, has established the Credit Guarantee and Investment Facility to provide credit enhancement for investment grade companies seeking to issue local currency bonds.
