KUALA LUMPUR: More has to be done to make the Asian Bond Market Initiative (ABMI) a reality despite substantial progress in developing bond markets in the region recently, Hong Kongs Secretary for Financial Services and the Treasury Frederick Ma said.
It is very difficult to say how the ABMI will go. The pace will be different from country to country, but I think they are all heading towards one direction, he said.
He was speaking to reporters here yesterday at the end of his five-day visit to Indonesia, Singapore and Malaysia to promote Hong Kong as an international financial and business centre.
While the existing Asian Bond Fund created by the central banks in the region had managed to raise US$1bil (RM3.8bil) to invest in US dollar denominated bonds in the region, this had only addressed the demand aspect of the bond market, Ma said.
There is also a need to address the supply side, he said.
He said there was a need for good bond issuers and this would require the various countries in the region to put in place the infrastructure in the form of good regulatory framework, legal systems and corporate governance.
He added that the second ABF would contribute significantly to the development of domestic and regional bond markets by being denominated in local currencies.
Ma said the region still lagged behind mature bond markets such as the United States and Europe.
However, in the past seven or eight years, a lot has been done to change the balance towards relying less on bank financing and more on bond financing, he said, adding that it was good that the many regional forums were working towards developing a strong bond market.
Malaysia, he said, had done particularly well in developing its bond market.
Last year, over 20% of financing came from bonds. That is a higher proportion than many countries in the region, he said.
He said developing a deep and liquid bond market in the region was important because it would bring about financial stability and prevent financial meltdowns like that of 1997.
As for Hong Kong, Ma who is commonly called the Secretary of Bonds for his emphasis on this area said the government had taken several steps to expand the bond market.
This included the securitisation of five government toll tunnels and bridge earlier this year where US$770mil worth of bonds were issued.
The securitising exercise involved selling bonds to the value of expected tolling revenue over a period of time. Toll revenue is around HK$1.5bil (RM750mil) annually.
Ma also said the government hoped to complete a HK$20bil (RM10bil) bond issue by July.
There will be three tranches, one of which would be open to anyone worldwide, he said, adding that the funds raised would be spent on infrastructure in the territory.