ASEAN Bond Markets Have Better Growth Prospects

KUALA LUMPUR, Nov 24 (Bernama) -- ASEAN bond markets have better growth prospects with relatively higher yields as compared to those of developed markets. CIMB-Principal Asset Management Bhd Chief Executive Officer, Munirah Khairuddin, said the region's better growth prospects would result in stronger currencies and a potential ratings upgrade. "Government bonds from Malaysia, Thailand, Indonesia and the Philippines are now included in various bond indices, such as JP Morgan Emerging Bond Index, which is widely used by global bond investors," she said at the ASEAN Roundtable Series on “Broadening investor base in ASEAN bond markets” here Friday. The roundtable is organised by CIMB ASEAN Research Institute in collaboration with the ASEAN Business Club and the Asian Development Bank. Munirah said for Malaysia, the market had a large investor base such as the pension fund, asset management companies and financial institutions to provide breadth and depth, as well as liquidity. The combined size of the ASEAN bond markets was US$1.19 trillion in June 2017 compared to US$112.76 billion in 1997, largely due to various incentives and policies of regional governments, pertaining to the reduction of withholding tax and improvements in market liquidity. CIMB-Principal's current asset under management stands at RM74 billion across ASEAN. However, Munirah noted tax harmonisation among ASEAN countries needs to be addressed to attract further investments in the region's bond market. "One challenge is tax uniformity. For example, if we invest in Thailand we get taxed. That is a setback and there are a few other tax irregularities. It is important that we harmonise this and make it favourable as our yields are interesting,” she added. At the event, the Asian Development Bank also launched its Asia Bond Monitor November 2017. According to its report, Emerging East Asia's overall local currency bond market continued to expand, reaching US$11.6 trillion at the end of September 2017, as China continued to drive the region's bond market growth. This is despite the Chinese government's deleveraging efforts. Growth was higher at 4.2 per cent quarter-on-quarter and 11.6 per cent year-on-year in the third quarter of 2017 compared with 3.3 per cent quarter-on-quarter and 10.6 per cent in the second quarter of the year. -- BERNAMA