Welcome Remarks


YBhg Datuk Ranjit Ajit Singh
Managing Director, Securities Commission Malaysia

at the

Asian Bond Markets Conference 2009, Co-hosted by Malaysia and the Asian Development Bank

Gearing Up Regulatory Framework and Regional Cooperation
– A New Area of Growth in Asian Bond Markets

2 December 2009

Securities Commission Malaysia, Kuala Lumpur

Yang Berhormat Dato’ Seri Ahmad Husni Hanadzlah, Minister of Finance II Malaysia
YBhg Tan Sri Dr Wan Abdul Aziz Wan Abdullah, Secretary General of Treasury Malaysia
Mr. Bindu Lohani, Vice President of the Asian Development Bank, our co-host for the Conference
Mr. Shi Wenchao, Secretary-General of China National Association of Financial Market Institutional Investors
Distinguished guests, ladies and gentlemen


On behalf of the Securities Commission Malaysia, I am pleased to welcome all of you today to the Asian Bond Markets Conference 2009 in Kuala Lumpur. We are indeed privileged to organise this Conference with the Ministry of Finance Malaysia and in collaboration with the Asian Development Bank.


I wish to thank Yang Berhormat Dato’ Seri Ahmad Husni Hanadzlah, the Honourable Minister of Finance II for his presence this morning to deliver the Opening Address and to officiate this Conference. This Conference, which engages relevant stakeholders in the Asian bond markets, will provide an important strategic platform towards forging greater partnership among the East Asian economies in developing their capital markets. This path of regional integration has been welcomed, adopted and strongly supported by Malaysia. I note that the Honourable Minister is also very keen to foster greater integration within Asia, not only in the areas of intra-regional trade and foreign direct investment, but also for its financial markets.


Today, we are fortunate to have here with us important policy makers and self-regulatory organisations from selected ASEAN+3 countries, as well as prominent experts from financial intermediaries with presence in this region to speak at this Conference. They will share their valuable insights on opportunities and challenges within the bond markets in the region, as well as exchanging ideas and proposals to create more vibrant, sizeable and integrated markets for Asia.

Bond markets in Asia to be developed further post crisis


Although there is now a wide consensus that the worst of the recent crisis is behind us, the global economy is likely to enter into a long period of slow growth according to the IMF. It is further warned that there will be on-going risk of adverse feedback loop between real and financial sectors as the deleveraging process takes place. Against this backdrop, it is imperative for us in Asia to further develop and strengthen our capital markets, as we have done following the 1997/1998 crisis, to better withstand any external shock while simultaneously achieving sustainable economic growth.


It is foreseeable that the intra-regional foreign direct investments or FDIs will grow rapidly in tandem the increased level of economic integration in the region. In this regard, if these FDIs continue to be financed by short-term bank borrowings, it will not help enhance the region’s financial stability objectives as this form of financing is vulnerable to the sudden reversals of short-term capital flows. It is therefore vital for the FDIs to be funded by the issuance of long-term bonds, including local currency denominated bonds in the investee country.


By having this flexibility of financing, companies investing within the region will be allowed to minimise their exposures to currency and maturity risks. On the other hand, cross-border issuance of bonds among regional companies could further expedite the development of domestic bond markets and enhance financial integration in the region. In the context of ASEAN, we have endorsed an Implementation Plan under the ASEAN Capital Market Forum or ACMF to promote the development of an integrated capital market through the ASEAN Economic Community Blueprint 2015.


We also need to embark on a flexible framework to facilitate cross-border investment into our domestic bond markets. We should be encouraged by the renewed interest of foreign investment into our domestic bond markets, as highlighted by the World Bank recently. Resident capital reflows in the first half of 2009 were the largest in this decade, reflecting expectations that the returns on East Asian local currency bonds will outperform those of foreign securities. Foreign investment of local currency denominated bonds has recovered throughout the region, mainly in Indonesia, Malaysia and Korea. For example in Malaysia, foreign holding of both government and corporate bonds has increased to RM48 billion as at end-September 2009, which is an increase of more than 20% from its low at the beginning of this year.


It is the objective of Asian Bond Markets Initiative or ABMI to achieve sustainable growth for the domestic bond markets in the region. One of the priorities under the ABMI is strengthening of regulatory framework to create a conducive environment for the domestic bond issuances and intra-regional issuances. In this regard, the ASEAN+3 authorities have agreed to work towards establishing best practices which comply with international core principles.


The Securities Commission Malaysia is entrusted with this responsibility, together with Ministry of Finance Japan, to lead a Task Force which spearhead regulatory efforts on these aspects. It is therefore the thrust of this Conference for Malaysia and Japan to engage regional policy makers and market players in a forum like this. Through this forum, we hope to provide an opportune and candid flow of discussions on meaningful ways to overcome challenges ahead of this integration process for our markets.

Strengthening regulatory framework in the Asian bond markets


In strengthening the regulatory framework in the Asian bond markets, authorities in the region could consider benchmarking their policy framework and practices against the key markets in the region, if not the international markets. One of the most effective means of benchmarking is for the government bonds to be included in the leading international bond indices. A good example of these indices is Citibank’s World Government Bond Index which is the most referenced benchmark market index by the international investing community. In this regard, the Malaysian bond market has been included, together with other Asian markets such as Japan, Singapore and soon Korea, as a component of this Index. By meeting some of the standards and practices set out in the index, we see the benefits of Malaysia in successfully attracting a stable source of foreign investment into our bond markets.


On the corporate bond market, due consideration should be given to establishing a facilitative issuance framework including allowing for medium-term notes programme, and perhaps from the Asian perspective, giving priority to regional institutions or their local subsidiaries for the offering of note programme. Such framework would contribute towards increasing the supply of local currency bonds as issuers could time the market to raise funds as and when the prevailing rates are favourable to them.


While intra-regional issuance of bonds is promoted, we should also pursue growth of intra-regional investment of bonds which is lagging. For instance, the creation of regional bond funds which target investment into a basket of local currency bonds in the region will offer a good potential in promoting flows of financial transactions in the region. We should take up the challenge in addressing regulatory and market constraints that impede the intra-regional investment of bonds.

Ladies and gentlemen


I hope these key issues and components to address the challenges and to expedite the growth Asian bond markets will be discussed at length in this Conference. In this regard, I believe the audience today will gain most benefit by interacting, discussing and presenting your view point with the distinguished speakers and panellists. We will reflect your input and proposals raised in this Conference to the right process under the ABMI.

Thank you.