3/19/2016 Asia Bond Monitor - March 2014 | Asian Development Bank

Asia Bond Monitor - March 2014

The Asia Bond Monitor reviews recent developments
in East Asian local currency bond markets along with
the outlook, risks, and policy options.

Emerging East Asian bond markets remained relatively stable in the fourth quarter of 2013
amid the financial turmoil swirling in emerging markets. However, global liquidity is likely to
tighten as the US Federal Reserve is expected to continue tapering its monthly asset
purchases.

Bond yields in the region have risen since the tapering began in December 2013, and could
rise further in the months ahead.

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Emerging East Asian exchange rates have been adversely affected by the sell-off, but on a
much smaller scale than in other emerging markets due to strong economic fundamentals and
stable domestic financial systems.

Risks to the region's local currency bond markets have increased to include

potential vulnerability to contagion effects;

tighter liquidity conditions and rising inflation putting upward pressure on bond yields;
and
economies with high levels of foreign currency-denominated debt being vulnerable to
the impacts of currency depreciation.

Special section: Sukuk in emerging East Asia

This issue of the Asia Bond Monitor (ABM) has a special section dedicated to the Islamic
finance tool of sukuk.

The global sukuk market continued to post robust growth in 2013, having risen from only
$14.8 billion in 2001 to $281.3 billion at the end of 2013. Malaysia is the largest sukuk market
in emerging East Asia, accounting for nearly 60% of outstanding global sukuk.

Sukuk issuance remained strong in the region in 2013, with total issuance reaching $91.7
billion for the year. Malaysia was the most active issuer with $83.7 billion in new sukuk
issuance, as Malaysia is seeking to develop itself as an offshore sukuk center for other
countries.

Emerging East Asia (excluding Malaysia) accounts for only 6.0% of the world's outstanding
sukuk. Indonesia, Singapore, and Brunei Darussalam have established sukuk markets, but
these markets lack the size and depth of the Malaysian market.

Other markets like Hong Kong, China and Thailand have introduced regulations to develop
Islamic finance.

Challenges for Islamic nance in the region

Sukuk have great potential as a source of financing for infrastructure projects since the
financing for such projects can easily be adapted to accommodate sukuk. Malaysia has
already used sukuk to finance several large infrastructure projects, although the practice has
yet to gain popularity outside Malaysia.

Governments face challenges in enacting the needed regulatory framework to make sukuk a
viable alternative to conventional bonds. These challenges include standardizing sukuk
structures, promoting price transparency, and harmonizing tax treatment for conventional

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bonds and sukuk.

About the Asia Bond Monitor

The ABM reviews recent developments in East Asian local currency bond markets along with
the outlook, risks, and policy options.

The ABM covers the 10 Association of Southeast Asian Nations member countries plus the
People's Republic of China; Hong Kong, China; and the Republic of Korea.

Contents
Highlights Expand All

Global and Regional Market Developments

Bond Market Developments in the Fourth Quarter of 2013

Policy and Regulatory Developments

Sukuk
in Emerging East Asia: Trends and Future Challenges

Market Summaries

Download
4.13 MB

Related

Asia's Bond Markets Must Be Ready to Face the Rising Risk of Contagion

Islamic Finance in Asia and the Pacific

Asia Bonds Online

Data and Research

Finance

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Also in this Series

Asia Bond Monitor - March 2016

Asia Bond Monitor - November 2015

Asia Bond Monitor - September 2015

Asia Bond Monitor - June 2015

Asia Bond Monitor - March 2015

Asia Bond Monitor November 2014

Asia Bond Monitor September 2014

Asia Bond Monitor - June 2014

Asia Bond Monitor - November 2013

Asia Bond Monitor - September 2013

SEE ALL

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