عوامل مؤثر بر توسعه بازار اوراق قرضه در آسیا

One of the major reasons behind the Asian financial crisis in 1997 was the excessive dependence of the Asian economies on commercial banks for domestic financing. The region failed to diversify its sources of corporate financing as it relied mainly on banks since its other types of financing, namely bond markets, were still underdeveloped and their sizes were quite small. On the other hand, the 2008 global financial crisis and the ongoing European debt crisis have led to constraints in acquiring local currency and foreign currency liquidity in the corporate sector in Asia as foreign banks withdrew investments from Asia. Furthermore, Asia needs large long term capital (US$ 750 billion per year for 2010–2020) for developing infrastructure connectivity within and across its economies. Local and regional capital can be channeled for long-term infrastructure projects and other productive investment through bond markets. Having a well-developed local currency bond markets can enhance the resilience of domestic financial sector to external shocks and it can facilitate better intermediation of savings into productive investments in Asia. To enhance corporate bond financing, it is important to examine factors that affect the effective development of bond markets in Asia. The study attempts to identify the determinants of bond market development in Asian economies through examining the relationship of bond issuance with selected key financial and economic factors. It also intends to provide policy recommendations for the further development of the Asian bond market. Major determinants for bond market development in Asia include the size of an economy, the stage of economic development, the openness of an economy, the exchange rate variability, the size of the banking system, and interest rate variability.

One of the major reasons behind the Asian financial crisis in 1997 was the excessive dependence of the Asian economies on commercial banks for domestic financing. The region failed to diversify its sources of corporate financing as it relied mainly on banks since its other types of available financing, namely bond markets, were still underdeveloped and their sizes were quite small. Furthermore, the de facto peg of these economies’ currencies to the US dollar minimized the currency risks for both borrowers and lenders. In the case of local borrowers, this encouraged the excessive availment of foreign currency denominated loans as currency risks were deemed low while there was a significant difference between local and foreign interest rates. From the point of view of foreign lenders, this provided a somewhat stable currency, which, together with the higher growth rates and higher interest rates (i.e., higher returns on investment) in the Asian region relative to other parts in the world, encouraged foreign capital inflow. Asian economies faced the “double mismatch” problem or the “twin risk” problem, namely currency and maturity risks. Corporate borrowers predominantly created this problem by raising funds in foreign currency on a short-term basis. The Asian corporate sector borrowed short-term foreign currency loans from commercial banks, which they used for financing their long-term domestic investment. When debt service on short term loans matured but credit dried up, these corporate borrowers were not able to borrow capital from their outstanding investments. As default cases increased, it became more difficult and more expensive to borrow credit. As capital outflow continued, the currency depreciated and this worsened the ability of corporate firms and banks to pay since their debt in local currency had risen significantly (Asian Development Bank, 2002 and Kawai, 2007). Despite their experience during the Asian Financial Crisis, the corporate sector of the Asian economies continues to depend significantly on bank lending. Since banks are highly leveraged institutions, economies that depend heavily on bank financing are considered much more vulnerable to a financial crisis. The presence of such instability in the banking system can delay or worse, put into halt the implementation of important investment projects, thereby reducing aggregate demand (Herring & Chatusripitak, 2000). Moreover, the double mismatch problem of the region remains, albeit currency mismatch is relatively moderate compared to the Asian financial crisis (Park, 2011). This persistent double mismatch risk could be reduced if more corporate borrowers finance their needs through well-diversified portfolios, particularly through bonds. This calls for the development of sound and sustainable domestic local currency bond markets in Asia. Developing stable and liquid local currency bond markets will reduce the dependence of the Asian corporate sector on banks and foreign currency financing. They can borrow for longer maturity periods in local currency, which matches their investment needs, thereby avoiding balance sheet mismatches (Eichengreen & Luengnaruemitchai, 2004). In recent years, East Asia1 has been the fastest growing region in the world. For the period 2003–2008, the People's Republic of China (PRC) exhibited the highest economic growth, followed by Viet Nam. While Asia faced again another crisis in 2008, with the global financial crisis that originated in the United States (US), the emerging Asian countries witnessed strong growth rates ranging from 1.1% in Singapore to 9.0% in PRC. These are faster relative to the economic growth rates that were posted by other developed and emerging economies, some of which even experienced recessions (Asian Development Bank, 2009). However, investment uncertainty still caused capital outflow in most Asian economies. Similar to its Asian Financial Crisis experience, the corporate sector in Asia faced severe constraints in securing not only foreign currency but also local currency financing due to the low level of investors’ confidence in the financial markets. In addition, the 2008 global financial crisis and the ongoing debt crisis in Europe have caused a sudden withdrawal of short term deposits, bonds and other investments by investors from advanced economies, resulting in a reduction in liquidity, particularly in terms of dollars, in Asian countries. Furthermore, Asia needs a large long term capital (US$ 750 billion per year for 2010–2020) for developing infrastructure connectivity within and across its economies. Its local and regional capital can be channeled for its long-term infrastructure projects and other productive investment and this can be done through bond markets. The existence of well-developed local currency bond markets in Asia will not only enhance the resilience to external economic shocks of the domestic financial sector in the region but will also improve the intermediation of Asian savings into productive investments in the region (Bhattacharyay, 2010). At this juncture, it is very timely to examine how to enhance the development of bond markets in Asia. To undertake this, it is important to examine the factors or determinants that affect bond financing. The literature review shows that while there are studies on determinants of bond markets using cross-section time series data, these usually involved countries worldwide since no empirical study yet has been done that focused on Asian economies by type of bonds. This study attempts to identify the major determinants of bond financing by types of bond using appropriate econometric analysis for selected major East Asian economies, where adequate and comparable time-series data are available, namely Hong Kong, China, the PRC, Indonesia, Japan, Republic of Korea (henceforth Korea), Malaysia, the Philippines, Singapore, Thailand, and Viet Nam. The objective of the paper is to analyze the trends in bond market development in Asia and to identify the determinants of each type of bonds (i.e., corporate, government and total bond financing) in Asian economies by examining its relationship with selected key financial and economic factors. The next section presents the trends and structure in bond financing in terms of market capitalization for East Asian economies in comparison with other regions of the world for the period 1998–2008. The section also discusses the various regional initiatives for the development of the bond market in the region. The third section provides the methods used for data compilation and computation for dependent and independent variables that were used in the regression models as well as the econometric methodologies that were utilized in doing the analysis. The fourth section presents the results of the empirical analysis, followed by a section that discusses these results. The last section concludes.

In view of the Asian crisis in 1997, the ongoing global financial and economic crisis, and the ongoing European debt crisis, the development of bond markets in Asia assumes high importance for financing the region's corporate sector and large demand for infrastructure. Even though Asia's bond market witnessed considerable growth in recent years, the bond market financing size, particularly the corporate bond size is still quite low. Therefore, it is essential to identify the determinants of bond market development. The analyses were conducted by using simple OLS, multivariate OLS, Fixed Effects, Random Effects, and GLS models. It can be concluded that the major determinants of bond financing are: (1) The size of the economy for corporate and government bonds; (2) The stage of economic development for total, government and corporate bonds; (3) Openness of the economy for total and corporate bonds; (4) The size of the banking system total and government bonds; and (5) Variability in interest rate for total, government and corporate bonds. Well-developed bond markets can provide Asia with alternative sources of financing and at the same time improve the region's financial resilience by balancing the high dependence on the banking sector. Achieving a better balance between bank finance and bond markets requires a more focused, top-down approach. Asia also needs to utilize its huge savings and international reserve for meeting large needs of productive investment in the region, particularly in infrastructure through bond markets development. Regional cooperation schemes, such as the ABF and ABMI are important instruments for facilitating regional bond market development. There is an urgent need to strengthen, expand and deepen these initiatives and to include other emerging economies of Asia, such as India and other major South and Central Asian economies. In this regard, multilateral development banks (MDBs) such as the ADB has an important role to play in developing Asia's bond markets. New initiatives, such as developing liquid corporate bond market and broadening the issuer base may also prove useful. In order to further integrate and deepen bond markets, Asian economies need to adopt several measures including (i) harmonization and strengthening of financial regulation and credit and trading standards; (ii) legal and regulatory framework conducive to investors; (iii) developing innovative financial instruments and promoting better access to regional and international investors; (iv) a regional guarantee mechanism; (v) a harmonized regional clearing and settlement system; and (vi) enhanced local and regional credit rating system among others. Asia needs to mobilize a large amount of capital for financing their huge infrastructure needs for developing connectivity within and across its economies. The financing needs for Asia's infrastructure are estimated to be around US$ 750 billion per year in energy, transport, telecommunications, water and sanitation during 2010–2020 (Bhattacharyay, 2010). Infrastructure projects are usually long-term in nature. Given this huge requirement, one of the possible ways to bridge financial gaps is to tap Asia's large savings and international reserves and to channel them to infrastructure investment. In 2009, the total annual savings of the 11 major Asian economies4 was approximately US$ 3,390 billion, while the stock of total foreign exchange reserves reached US$ 4,686 billion. At present, a large portion of these savings are invested in markets of developed economies at a low return. This huge financial resource may provide an effective solution to the problem of financial gap. Local and regional capital can be channeled for long-term infrastructure projects and other productive investment through bond markets. Strengthening, integrating and deepening local bond markets, particularly in local currencies can play a significant role in mobilizing the required funds for enhancing Asian connectivity. The rationale of such investment is, it will not only stimulate domestic economies but also enhance regional-level connectivity and integration, thereby increasing regional demand and intra-regional trade and thus rebalancing Asia's growth away from high dependence of export to advanced economies, such as US and Europe. Strategies for the development of robust domestic bond markets include (Fabella & Madhur, 2003): (1) Sustaining a stable macroeconomic environment with low inflation and stable interest rates; (2) Developing a healthy government bond market that would serve as a benchmark for the corporate bond market; (3) Completing the post crisis agenda of banking sector restructuring; (4) Improving corporate governance; (5) Strengthening the regulatory framework for bond market; (6) Rationalizing tax treatment of bonds; (7) Broadening the investor base; and (8) Promoting the growth of regional bond market centers. Furthermore, in order to further develop and integrate bond market, Asia needs to promote bond issuers and investors from the region as well as outside the region. This requires legal and regulatory framework conducive to investors, a regional guarantee mechanism, harmonized credit and trading standards, a regional clearing and settlement system and enhanced local and regional credit rating system. Asian Development Bank (ADB) and other multilateral development banks such as World Bank and International Finance Corporations with knowledge and financial resources have been playing an important role in developing aforementioned bond market infrastructure. They need to play a more prominent role in strengthening Asian bond markets in coming years.