Final Presentation Tatsuya OGAWA
>  Although Asia had grown a lot for last few decades, there was a crisis, and then there would be worries about whether Asian countries sustainably can grow or not due to its vulnerability in financial market > Therefore through examining Asian financial market, I want to convince Asian countries growth
This chart shows that Asian public bond market grew to the great extent, but not about private one (3) Government and corporate bonds outstandings Government and corporate bonds outstanding
"Asian Private Bond Market has not been matured even after the financial crisis. “ We need some improvements
>  Fixed vs. Floating Exchange Rate During dollar-pegged exchange rate system, Asian financial market was stable
Below shows Asian market had been attractive due to stable currency
After Asian Financial Crisis, Southeast Asian countries suffered a lot due to mismatches of currency Maturity & Currency mismatches: SEAs had to repay loan “right after’’ local currency severely “depreciated”
>  Receiving the challenge of mismatches, Three East Asian countries & SEAs tried to make Asian Bond Market Initiative (ABMI) ›  ABMI proactively foster SEAs local currency (LCY) bond market maturity
A After AFC, Asian LCY bond market had been developed at 16% pace yearly However, private LCY bond market progress is littleんFigure 1: Growth of the Emerging Asian LCY Bond Market Notes: ides People's Republic of China; Hong Kong, China; India; Indonesia; Republic of Korea; Philippines; Singapore; Thailand; and Viet Nam 2. For India, 3Q12 data carried over from December 2011 Source: AsianBondsOnlin
There are two ways of explanation » Politics & Economics ■ Politics 1) 2) ABMI (ADB&East Asian countries contribution, structural change) Local government & central bank cannot change dollar in floating exchange rate (Macroeconomics analysis; small open market monetary policy does not work to change exchange rate) ■ Economics 1)  After last worldwide financial crisis, worldwide money outflow is to bond sector rather than stock and other risker assets (After 2008) 2) SEAs is experiencing a period that people's salary is always increase, so their saving rate is getting higher (inflow to bond market) Demand side needs less risker and longer term loan 3)
A scholar said through below regression that if foreign participation increases, bond yield will decrease
Table 3. Fixed effects estimates of long-term yields (2000Ω1–2009Ω1) The t-statistics are in parenth ** significance at the 5 percent level * significance at the 10 percent level
This shows that less capitalized Indonesian bond market has more foreign participation. This shows different result from previous regression in that less capitalized market actually has more foreign participants
Credit Guarantee and Investment Facility (CGIF) try to foster further development of private LCY ABMs by making financially secured system Countries, such as Japan & China, invest their money in this ■ピinstitution to make investor easier to invest in the region
>  As the fundamental part, there are many positive reasons that foster ABMs developments, particularly CGIF by ADB > However, although there are suggestions in private LCY ABMs, not all of the suggestions are accurate. >  We need further examination about how to develop private ABMs
* Do Jong-rok, "ASEAN+3 ministers and central bank governors' meeting successfully concludes", Ministry of strategy and finance, Press Release * Jeffrey D. Sachs and Wing Thye Woo, "A Reform Agenda for a Resilient Asia", (2000) in a book "The Asian Financial Crisis Lessons For a Resilient Asia", edited by Wing Thyre Woo, Jeffrey D. Sachs and Klaus Schwab * Iwan J. Azis, Sabyasachi Mitra, Anthony Baluga, and Roselle Dime, (Jan 2013) ‘‘The Threat of Financial Contagion to Emerging Asia’s Local Bond Markets: Spillovers from Global Crisis’’, ADB Working Parper Series on Regional Economic Integration * Takeshi Kurihara, (February 2012) “Achievements of Asian Bond Markets Initiative (ABMI) in the last decade and Future Challenges, OECD-ADBI 12th Roundtable on Capital Market Reform in Asia" "Asia Needs Better Developed Bond Markets", June 2013, Asian Century Institute: http://www.asiancenturyinstitute.com/economy/250-asia-needs-better-developed-bond- markets * Office of Regional Economic Integration Asian Development Bank, (2009) ‘‘ABMI Directory of institution investors in the ASEAN+3 bond markets ’’ P. 34-37, 54-57 * Shanaka J. Peiris, "Foreign Participants in Emerging Markets' Local Currency Bond Markets", Apr 2010, IMF Working Paper