Sat, Feb 03, 2001 - Page 17 News List

Association to promote bond market

FINANCE The Asian Bankers Association is working on ways to reduce dependence on overseas loans by improving the credit-rating mechanism for regional bond issues

By Tsering Namgyal  /  STAFF WRITER

A leading regional banking group said yesterday that it will lead efforts to stimulate the region's sleepy bond market. The Asian Bankers Association (ABA) -- founded in 1981 by chairman of Chinatrust Bank (中信銀行) Jeffrey Koo (辜濂淞) -- is now seeking to unify the rating criteria for 19 Asian credit rating agencies.

"The efforts will aim to accelerate the growth of the region's nascent local currency bond markets and promote greater cross-border investment," said Wang heh-song (王鶴松), who is now the chairman of the ABA's Bond Market Development Task Force.

That will help regional corporations reduce their dependence on the "Big Three" global credit rating agencies -- Moody's, Standards and Poors and Fitch IBCA -- which they say may not be too well-versed in the workings of local firms.

The bankers say that domestic Credit Rating Agencies have a better grasp of regional companies than their international counterparts.

Dato Ismail Shahudin, executive director of Malayan Banking Berhad, said that a well-developed bond market will help tap high savings in Asia and mobilize them into productive investment in the region, a move that may help reduce dependence on overseas loans, he said.

Large foreign debt by domestic corporations is seen as one of the factors that helped cause the Asian crisis in 1997 and 1998, said a statement by the ABA, which held a press briefing in Taipei yesterday to publicize its regional initiative.

Big three rating agencies aside, there are currently 19 domestic rating bodies -- such as Taiwan Ratings in Taipei, Philratings in Manila, and Rating Agency in Manila -- operating in the region.

A recent study by ABA showed that most Asian institutional investors believe domestic credit rating agencies had "a better understanding of local firms and better access to local information than their global counterparts."

A leading banker even called that it is "unfair" to force local firms to be subject to the credit rating standards usually applied to companies in the developed economies. ABA, whose members currently include 130 leading banks from 25 Asian economies.

While the regional saving rates were nearly twice as those of others -- a large portion of those savings were invested in other markets from where they flowed back to Asia in the form of short-term portfolio investments, said Wang, who is also the chief economist for International Commercial Bank of China (ICBC, 中國商銀).

Julius Parrenas, senior advisor to the chairman of the Chinatrust Bank, said that the regional bond market is growing very fast -- thanks to the lack of adequate infrastructure and benchmark yield curves in Taiwan.

ABA has made the development of the regional bond market one of its top priorities. ABA founder Jeffrey Koo recently wrote an opinion piece in the Asian Wall Street Journal recently, calling for a coordinated effort to strengthen the region's incipient fixed income market.

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