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US sub-prime woes ‘should not deter Asian bond growth’

ASIAN bond markets must continue to grow and develop, even though it was their relative lack of sophistication that spared them from the worst of the United States sub-prime crisis.

A conference on regional bonds in Singapore yesterday heard that the highly complex financial products used by American and European banks are still not that prevalent in the Republic. Yet it is these same products that are at the heart of the credit mess now.

This has led some observers to ask if Asia should slow the pace of innovation in its bond and credit markets.

But Mr Ong Chong Tee, deputy managing director of the Monetary Authority of Singapore, said: ‘It is important to avoid the mistake of planning only based on the last crisis.

‘Each financial crisis or shock will bring with it unique circumstances and lessons. But in and by themselves, they should not become reasons to dampen market development and growth.’

He was echoing Senior Minister Goh Chok Tong’s remarks at the Barclays Asia Forum earlier this month.

Mr Goh had urged Asian institutions to press on with efforts to develop capital markets and create robust and efficient systems.

Developed financial markets across the world have been shaken by problems in the US housing market, with big-name American and European banks reporting billion-dollar losses on investments linked to poor-quality home loans.

By contrast, banks in the region have been largely unscathed as their exposure, if any, to these complex instruments has been small, said Dr Lee Jong Wha, who heads the Asian Development Bank’s (ADB’s) regional economic integration office.

But Mr Ong stressed that bonds and other capital market products are good alternatives to bank loans for firms.

The heads of the fixed-income sections at various banks told the seminar, which was organised by The Asset magazine and the ADB, that growth momentum has eased for more complex instruments but deals have not dried up.

Standard Chartered Bank’s capital markets global head, Mr Brad Levitt, said Asian currency-denominated bonds have outgrown issues in the US dollar, euro and yen.

 

Source: The Straits Times 23 Nov 07

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