The proponents of the Asean bond markets integration should focus at mutual recognition to facilitate cross border issuance instead of harmonization, which while it is a good initiative is taking take time to happen.

Chung Chee Leong, CEO of Malaysia’s national mortgage corporation Cagamas, told the delegates at the 9th Asian Bond Markets Summit held on November 26 in Singapore that mutual recognition will be more acceptable for regulators in the region. “This will facilitate cross-border issuance for companies such as Cagamas, to issue bonds, for instance, in Indonesia and the Philippines without having to do another rating,” he says. “While we have an international rating, but assuming that we only have a domestic rating, doing another documentation incurs a lot of cost.”

Lee Ka Shing, head of debt capital markets at Maybank Kim Eng, notes that the issue among the Asean member countries is the currency. “While each country knows each other, the currency issues among themselves cannot be resolved because of the availability of the swap,” he points out. “At the same time, investors are getting more mobile, and we should encourage that.”

This develops as the volume of issuance in the Asian local currency bond markets is expected to increase in 2015. Charlie Wang, chief investment officer at Sentosa Capital notes that with the issuance in the debt market tied up with GDP growth, Asia will see an expansion in debt issuance, such as in Indonesia. “There will be a healthy issuance in 2015,” he says. “Investor appetite is there and there is large liquidity pool in the system. Local currency bonds will definitely be of a lot of interest to investors, especially for diversification purposes.”

Daniel Lai, investment director at Eastspring Investment, is positive about the growth of the offshore renminbi bond market, while Cagamas’ Chung expects the Malaysian corporates to be looking at this market, as well as an alternative funding avenue. Chung sees a lot of issuance in the local currency bond markets, such as in Malaysia, particularly in the sukuk space to fund infrastructure projects.

Brian Baker, head of Asia, ex-Japan, and CEO and director at PIMCO Asia, notes that barriers are coming down in the Asian local currency bond markets during the past several years, which enable the foreign investors to access these markets and bode well for more issuances.