Asian Bond Markets
From Wikipedia, the free encyclopedia
Asian Bond Markets are growing rapidly as Asian borrowers switch away from short term bank loans towards longer term debt financing. Although Asia is often thought of in financial markets as being just the Far East, Asia also includes countries of the Middle East, Kazakhstan and the vast majority of the land mass of Russia and Turkey.
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[edit] Issuance
Issuance in Asia is predominantly issued by sovereign issuers but Corporate bonds are becoming an important source of growth in Asian fixed income markets. Currently issuance is predominatly in US dollars, although local currency issuance is also growing. Asian governments, central banks and the Asian Development Bank are keen to see the expansion of Asian bond markets over the next few years in order to help provide finance for the large infrastrctural development that the region needs over the next decade. Alongside the expansion of the bond markets, Asian governments and central banks are currently discussing the creation of an Asian Currency Unit. The ADB has suggested that bonds may also be issued in ACU over the next few years. This would help lower the financing costs for Asian issuers who have substantial trade links with other countries in the region.
Asian issuers tends to have a much higher credit rating than other sovereign debt, particularly those in Latin America because of the strong economic underpinnings and low political risks. Most Asian countries have ratings which are investment grade.
[edit] History
Asian economies suffered badly from the East Asian financial crisis in 1997 and subsequently academic research has identified the over-reliance on short term bank financing as a major cause of economic failure. Governments and central banks are keen to encourage the expansion of the Asian bond markets in order to reduce the reliance on short term bank loans and so avoid the economic catastrophe that occurred in 1997/1998.
[edit] Investing in Asian Bonds
Large investors can buy bonds directly, whereas smaller investor tend to invest via mutual funds. The two major Asian bond indices are the HSBC Asian Bond Index and the JP Morgan JACI Index.
