Connectivity in Asean bond markets must be inclusive

KUALA LUMPUR: Any form of connectivity in the bond markets across Asean must be inclusive and provide benefits to all participating countries, said Securities Commission chairman Tan Sri Ranjit Ajit Singh.

He said while integration is the aspiration for Asean bond markets, connectivity is an opportunity that is apparent right now.

“While we continue to pursue various initiatives to drive the connectivity of the Asean bond markets, there are also three themes that cannot be ignored.

“These are namely investing for the future based on concerns on climate change, inclusiveness that include SMEs and technology aspects,” he said in his speech at the Asean Fixed Income Conference 2017: Riding the Wave of Asean Bond Market Integration yesterday.

He particularly outlined concerns over climate change, deteriorating environment and social concerns, that had created demand for investments that would protect the planet’s future as well as society.

“There is particular interest from investors to make investments that would help the environment or society.

“Sustainable and responsible investments (SRI) can help create a distinctive class of investments that can also establish an Asean asset class attractive to regional as well as global investors,” he said.

At the same time, Ranjit said it would also provide sustainable and responsible initiatives among Asean’s access to financing.

“Malaysia has at present in place an SRI Sukuk framework to enable investments to flow into this important segment.

“At the same time, the Asean Capital Markets Forum (ACMF) is also working on an initiative to help green bonds in the regional grouping receive the right recognition, while ensuring they meet certain standards,” he added.

Ranjit said this can also result in the creation of new Asean bond asset classes that would help provide further linkages between the bond markets.

On the second theme of inclusiveness, he said, bond markets, being part of market-based financing is a solution not just for large corporates and sovereigns, but also for small and medium enterprises (SMEs) who represent a significant portion of economic output and employment in the region.

“An enhanced and innovative regional private placement regime can help small and medium businesses access capital,” Ranjit said.

He said Malaysia had introduced a framework for Peer-to-Peer (P2P) Financing to meet the funding needs of smaller businesses through registered P2P platforms.

On the technology theme, he said, it is both an enabler and driver for change for the regionalisation of Asean bond markets.

“However, with the rapid changes in technology, more solutions are starting to manifest themselves.

For example, distributed ledger technology, can help provide trading, clearing and settlement solutions for regional connectivity.

“The P2P platforms I spoke of earlier can also provide more points of connectivity.

Financial technology to bring bond origination on-line can change the way bonds are distributed and traded with new levels of transparency.

“Digitisation can also help drive the much needed liquidity for a regional bond market to succeed.

The question before us is not whether technology will change the bond markets but how much and how quickly,” he added. — Bernama