Chapter 13: Capital structure and the issuance of corporate bonds in emerging Asia
What drives the issuance of local-currency bonds? This question has been prominent in the minds of policymakers in the emerging economies of Asia. In 2005, the finance ministers of the ASEAN+3 countries met in Madrid and launched a new roadmap for developing local-currency bond markets under the Asian Bond Markets Initiative. The roadmap identified four critical areas: (1) promoting the issuance of local-currency bonds; (2) fostering demand for these bonds; (3) improving the regulatory framework; and (4) improving the infrastructure. This chapter is about the first of these critical areas, that of increasing the issuance of local-currency bonds. Siackhachanh (2012) has recently assessed the progress made under the new ABMI roadmap. She points out that the authorities in the region have encouraged bond issuance by state-owned firms, including financial institutions, utilities and airlines. By 2011, the Chinese policy banks accounted for 31 percent of the PRC’s outstanding local-currency bonds. Throughout the ASEAN+3 countries, multilateral development banks have been allowed to issue in local currencies, most notably in Malaysia and Thailand. Until the subprime mortgage crisis in 2008, there had also been some progress in the securitization of mortgages and consumer finance. Notably absent in all these developments has been the corporate bond market.
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