Hong Kong calls for regional co-operation in bond market development

Members of the Asia Pacific Economic Co-operation forum (APEC) were today (September 4) urged to step up their efforts and improve co-operation in developing a regional bond market.

The call came from Hong Kong's Secretary for Financial Services and the Treasury, Mr Frederick Ma, during an address to the 10th APEC Finance Ministers' Meeting in Phuket.

He said the Asian financial crisis highlighted the importance of establishing bond markets to avoid over-reliance on bank and equity financing.

"In developing the regional bond market, we must work together at both regional and domestic levels, tackling supply and demand sides at the same time," Mr Ma said.

He said initiatives taken by APEC, ASEAN+3 and the Executives' Meeting of the East Asia-Pacific Central Banks (EMEAP) complemented each other.

From the demand perspective, the EMEAP Working Group on Financial Markets, chaired by the Hong Kong Monetary Authority, has launched a US$1 billion Asian Bond Fund (ABF).

This Fund helps channel back into the region a small portion of the US$1.5 trillion official reserves held by the Asian economies.

"After the launch of the US dollar ABF, the EMEAP Group is now proceeding with the study of a local currency ABF with the aim of extending the concept to include bonds denominated in local currencies," Mr Ma said,

"This should further contribute to the broadening and deepening of local currency bond markets in the region."

From the supply perspective, the ASEAN+3 is studying proposals to facilitate access to the market by a wide variety of issuers, as well as the creation of an environment conducive to developing bond markets.

Mr Ma said that while the ASEAN+3 and EMEAP initiatives tackled bond market development from a regional level, the APEC initiative on Development of Securitisation and Credit Guarantee Markets was designed to tackle the issue at the domestic level by promoting an understanding and awareness of their importance.

The APEC initiative is chaired by Hong Kong, together with Korea and Thailand.

Another important objective of the initiative is to assist APEC economies to identify market impediments, such as tax, accounting, legal and regulatory barriers, and to draw up firm action plans to deal with any problems.

Hong Kong is one of the seven member economies which have sponsored experts to assist in the initiative.

Mr Ma also briefed the APEC meeting on the efforts made by Hong Kong in the development of its bond market.

He highlighted the measures introduced to simplify the regulations and streamline procedures in issuing and listing debt securities, the plan to grant tax concession on profits tax for qualified debt instruments with three years or more, the issuance of bonds of long term tenure by public corporations, and the Hong Kong Monetary Authority's pilot scheme to promote Exchange Fund Notes in the retail market.

"All of these have helped provide a greater choice for investors and to make our bond market, particularly at the retail level, more mature," Mr Ma said.

End/Thursday, September 4, 2003