asia pacific financial forum – capital market...

___________________________________________________________________________

2015/FMP/WKSP2/017 Session 4.1

Asia Pacific Financial Forum – Capital Market Developments

Submitted by: Standard Chartered

Workshop on Infrastructure Financing and Capital Market Development

Iloilo, Philippines23-24 July 2015

Asia Pacific Financial Forum – Capital Market Developments 0

Asia Pacific FinancialForum – Capital Market

DevelopmentsAaron Gwak, Head of Debt Capital Markets,

ASEAN, Standard Chartered

Larg

Vast imark

Bank

Clear

Where are we now?

nfrastructure need and aging population mean we need active capital


Critical to building deep, liquid and common

regulated capital markets

Vast infrastructure need and aging population mean we need active capital

markets to bridge the gap between asset managers and borrowers

Clear need for financing across Asia

Banking system alone is not enough to meet this need

Large savings pool needs a productive investment vehicle

Growing need for financing in Asia

There is a growing need for financing in Asia as shown by the rapid growth in total Asian bond issuance volumes and the

proportion of local currency bond issuances over the past decade

10%

200

Asia Pacific Financial Forum – Capital Market Developments 2Source: Dealogic, Standard Chartered Bank

As

ian

Bo

nd

Iss

ua

nc

e(U

SD

bil

lio

ns

)

48

173

26

6050

2009 to 2014 Asian bond issuances have grown at a CAGR of 14.7%

250

222CAGR

+14.7%

160 160

150 31 28

100 85 86

13

56 129 133

50

72

0

2009 2010 2011 2012 2013 2014

USD Local Currency

Excludes Japanese Yen, Australian Dollar and onshore Chinese Yuan bond issuances

Local Currency (“LCY”) share of

issuance

2009

LCY

USD90%

2014

LCY22%

USD78%

Significant growth potential for Asian bond markets

Asian domestic bond markets have grown in size, but there remains significant upside potential when compared to the size of

their GDP

136

20


20

14

LC

YB

od

Ma

rke

t/G

DP

(%

)

70 67

37

Local Currency Bond Market Size / GDP

160

140 JPY, AUD Average

120

100

80

60 125

100

40 82

51

22 15

0

KR MY SG TH HK CN PH VN ID

2014 Local currency bond issuance by currency

SGD30.4%

OffshoreCNY

56.7%

HKD11.3%

Others*1.5%

* Include THB (0.7%), MYR (0.3%), KRW (0.3%), IDR (0.2%) andINR (0.1%)

Growing base of Asian investors

There is a clear trend of new issuances moving to RegS only issues. This shows that Asian investors are becoming a more

important source of capital in the region

Asian Issuances in 2009 Asian Issuances in 2014

144a34%

144a63%

RegS66%


Meeting the needs of the market

A deep liquid market would lead to lower costs of funding for Asian business and also meet investor’s needs. We suggest the

following key elements of effective debt capital markets for regulators to consider

Sound legal system

Protection for creditor rights

Transparent accounting

Robust financial markets supervision and

corporate governance

Strong infrastructure/clearing support

Deep and liquid repo and derivative market to

allow both issuers and investors to hedge and

decouple risks


Elements of effective debt

capital markets

Addressing key policy differences

To achieve a common platform for capital markets across Asia, there is a need to address some key policy and regulatory

differences within the region

Common legal framework

Harmonize documentation and disclosure rules

Common tax and accounting treatments

Reduce capital and currency controls

Common investor access scheme catering to

both retail and institutional investors


Regulatory issues need to be

addressed

What is the fastest route?

Agreeing on a consistent pan-Asian prospectus for debt markets across the region is key to make quick progress indeveloping regional markets. We propose that this can be carried out in 2 phases


Phase II

• Address issues on tax and accounting treatments is essential, albeit we recognise this takes time

• Harmonise rules on access to retail investors eventually

• Other reforms will need to follow but developing a common prospectus is a fundamental step

Phase I

• Requires political and regulatory commitment

• Set a hard deadline for action points

• Common prospectus should be recognised by all regulators and the need for pre-approval should be removed


Appendix

Issuances dynamics in select Asian markets

Malaysian market is also the largest Sukuk market in ASEAN, with a relativelysmaller proportion of foreign issuances

Singapore has the highest percentage of foreign issuer issuances in the ASEANbond markets

16 40

14 35

12 30

10 25

8 20

6 15

4 10

2 5

00

2008 2009 2010

Domestic

2011 2012

Foreign

2013 20142008 2009 2010 2011

Islamic

2012 2013 2014

Conventional Foreign Issuers

Foreign issuances in CNH have remained small in proportionThailand has historically low foreign issuance with mainly Korean and Japaneseissuing local bonds to fund local subsidiaries

3,000 30

2,500 25

2,000 20

1,500 15

1,000 10

500 5

0 02008 2009 2010 2011 2012 2013 2014 2008 2009 2010

Domestic

2011 2012 2013 2014

Domestic Foreign Foreign

Asia Pacific Financial Forum – Capital Market Developments 9Source: Bloomberg, Asia Development Bank

TH

BB

on

dIs

su

an

ce

(US

DM

illio

ns)

SG

DB

on

dIs

su

an

ce

(US

Db

illio

ns)

CN

HB

on

dIs

su

an

ce

(US

Db

illio

ns)

MY

RB

on

dIs

su

an

ce

(US

Db

illio

ns)

846

676

1,845

1,332

829104 391 355

2

25

1

3

10

22

861 3

1

Thailand China

4.4 3.0

11.610.7

1.4

9.0

2.2

0.3

1.5

3.92.01.0

2

1

1 1

26

16 17

1 22

128

86

766

7 75 5

MalaysiaSingapore

Asian issuances and bond market size comparison

US Dollar remains the main fundingcurrency for Asian issuers

2009 – YTD2015 Asian bond issuances by issue currency

250

200

150 USD78%

OffshoreCNY12%

100

HKD3%

SGD7%

50

Asian issuances by currencies 2014

0

2009 2010 2011 2012 2013 2014 YTD2015

USD Offshore SGD HKD IDR INR MYR TWD PHP KRW THB VNDCNY

Asia Pacific Financial Forum – Capital Market Developments 10Source: Asia Development Bank, Bloomberg, Eurostat

As

ian

Bo

nd

Issu

an

ce (U

Sd

bil

lio

ns)

SGD

OffshoreCNY

USD

Asian issuances were driven by mainly USD, CNH, SGD and HKD

Local market regulatory overview

No restriction No restriction incorporated entities will enjoy No restriction

Issue rating is preferred for

recommended

the Singapore authorities remittance of funds to Sukuk format MoF only accepts applications

• Liquid swap market. SGD • Due to political uncertainty,use of proceeds must be

Sources: Standard Chartered Bank Asia Pacific Financial Forum – Capital Market Developments 11

Singapore CNH Malaysia Thailand

Accessibility for

international issuers

Documentation

Rating Requirement

Local Registration

Process

Other

Considerations

No restriction, but locally

tighter pricing

Standalone for MYR MTN

EMTN or Standalone EMTN or Standalone programme(can use existing Standalone

EMTN as a base)

Minimum “A-” rating required,

foreign issuers No requirement but preferred Local rating required local rating is highly

• No prior approvals required for • No approvals required for bond • Bank of Negara (BNM) • Approvals required from

issuance, but need to lodge issuance approvals required. BNM Ministry of Finance (MoF), Return on Debt Securities to • Filing with SAFE necessary for prefers foreign issuers in Bank of Thailand and SEC;

within 1 month from issue date. Mainland China • Securities Commission end of Mar, Jul & Nov;

approval minimum “A-” rating currently

required

• Both public and private • Access Asian & international • Local documentation in form of • MoF policy aims to promote

placement market investors in CNH MYR program allows for Thai debt capital market to

• Deal sizes range from USD 50- • Ticket sizes have recently multiple drawdowns foreign issuers

200m increased, reaching up to USD • Possibility of private and public • Execution process can be

• No additional approvals 50m eq. issuances complete within 6 – 8 weeks

required • Remittance to Mainland • Ability to access market on after the issuer receives

• A non-deal roadshow is possible short notice as documentation approval from the MoF

recommended to introduce • Limited liquidity in swap market is already in place • Secondary market is

new credits to local investors (both tenor & size) • Islamic issuance structure and traditionally very illiquid

proceeds can easily be Shariah compliant (ie. overall execution timeline could

swapped into USD. proceeds cannot be used for be longer

gambling, alcohol, commercial

lending, etc.)

Global Disclaimer

Global Disclaimer

Regulatory disclosure

Subject companies: --

Standard Chartered Bank makes no representation or warranty of any kind, express, implied or statutory regarding this document

or any information contained or referred to on the document.

Country-Specific Disclosures: If you are receiving this document in any of the countries listed below, please note the following:

Australia: The Australian Financial Services Licence for Standard Chartered Bank is Licence No: 246833 with the

following

Australian Registered Business Number (ARBN : 097571778). Australian investors should note that this document was preparedfor wholesale investors only (as defined by Australian Corporations legislation).

China: This document is being distributed in China by, and is attributable to, Standard Chartered Bank (China) Limited which ismainly regulated by China Banking Regulatory Commission (CBRC), State Administration of Foreign Exchange (SAFE), andPeople’s Bank of China (PBoC).

Hong Kong: This document is being distributed in Hong Kong by, and is attributable to, Standard Chartered Bank (Hong Kong)Limited which is regulated by the Hong Kong Monetary Authority.

India: This document is being distributed in India by Standard Chartered Securities (India) Limited which is a SEBI registered

broker and a member of the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited.

Japan: This document is being distributed to the Specified Investors, as defined by the Financial Instruments and Exchange Lawof Japan (FIEL), for information only and not for the purpose of soliciting any Financial Instruments Transactions as defined by the

FIEL or any Specified Deposits, etc. as defined by the Banking Law of Japan.

Korea: This document is being distributed in Korea by, and is attributable to, Standard Chartered Securities Korea Limited which isregulated by the Financial Supervisory Service.

Singapore: This document is being distributed in Singapore by Standard Chartered Bank Singapore branch only to accreditedinvestors, expert investors or institutional investors, as defined in the Securities and Futures Act, Chapter 289 of Singapore.Recipients in Singapore should contact Standard Chartered Bank Singapore branch in relation to any matters arising from, or in

connection with, this document.

South Africa: Standard Chartered Bank is licensed as a Financial Services Provider in terms of Section 8 of the Financial Advisoryand Intermediary Services Act 37 of 2002. Standard Chartered Bank is a Registered Credit Provider in terms of the National Credit

Act 34 of 2005 under registration number NCRCP4.

UAE (DIFC): Standard Chartered Bank is regulated in the Dubai International Financial Centre by the Dubai Financial ServicesAuthority. This document is intended for use only by Professional Clients and should not be relied upon by or be distributed to

Retail Clients.

United Kingdom and European Economic Area: Standard Chartered Bank is authorised by the Prudential RegulationAuthority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. This communication is not

directed at Retail Clients in the European Economic Area as defined by Directive 2004/39/EC. Nothing in this documentconstitutes a personal recommendation or investment advice as defined by Directive 2004/39/EC.

United States: Except for any documents relating to foreign exchange, FX or global FX, Rates or Commodities, distribution of this

document in the United States or to US persons is intended to be solely to major institutional investors as defined in Rule 15a-6(a)(2) under the US Securities Act of 1934. All US persons that receive this document by their acceptance thereof represent andagree that they are a major institutional investor and understand the risks involved in executing transactions in securities. Any US

recipient of this document wanting additional information or to effect any transaction in any security or financial instrumentmentioned herein, must do so by contacting a registered representative of Standard Chartered Securities (North America) Inc., 1Madison Avenue, New York, N.Y. 10010, US, tel + 1 212 667 1000.

WE DO NOT OFFER OR SELL SECURITIES TO U.S. PERSONS UNLESS EITHER (A) THOSE SECURITIES AREREGISTERED FOR SALE WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND WITH ALL APPROPRIATE U.S.STATE AUTHORITIES; OR (B) THE SECURITIES OR THE SPECIFIC TRANSACTION QUALIFY FOR AN EXEMPTION UNDER

THE U.S. FEDERAL AND STATE SECURITIES LAWS NOR DO WE OFFER OR SELL SECURITIES TO U.S. PERSONSUNLESS (i) WE, OUR AFFILIATED COMPANY AND THE APPROPRIATE PERSONNEL ARE PROPERLY REGISTERED ORLICENSED TO CONDUCT BUSINESS; OR (ii) WE, OUR AFFILIATED COMPANY AND THE APPROPRIATE PERSONNEL

QUALIFY FOR EXEMPTIONS UNDER APPLICABLE U.S. FEDERAL AND STATE LAWS.

The information on this document is provided for information purposes only. It does not constitute any offer, recommendation orsolicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute

any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceedthose shown in any illustration. Users of this document should seek advice regarding the appropriateness of investing in anysecurities, financial instruments or investment strategies referred to in this document and should understand that statements

regarding future prospects may not be realised. Opinions, assumptions, forecasts, projections and estimates are as of the dateindicated and are subject to change without prior notice.

The value and income of any of the securities or financial instruments mentioned in this document can fall as well as rise and aninvestor may get back less than invested. Future returns are not guaranteed, and a loss of original capital may be incurred. Foreign-currency denominated securities and financial instruments are subject to fluctuation in exchange rates that could have a positive oradverse effect on the value, price or income of such securities and financial instruments.

Past performance is not indicative of comparable future results and no representation or warranty is made regarding futureperformance.

Standard Chartered Bank is not a legal or tax adviser, and is not purporting to provide you with legal or tax advice. If you have anyqueries as to the legal or tax implications of any investment you should seek independent legal and/or tax advice. Standard

Chartered Bank, and/or a connected company, may have a position in any of the instruments or currencies mentioned in thisdocument.

Standard Chartered Bank has in place policies and procedures and physical information walls between its Research Departmentand differing public and private business functions to help ensure confidential information, including ‘inside’ information isnot publicly disclosed unless in line with its policies and procedures and the rules of its regulators.

Data, opinions and other information appearing herein may have been obtained from public sources, Standard Chartered Bankmakes no representation or warranty as to the accuracy or completeness of such information obtained from public sources. You are

advised to make your own independent judgment (with the advice of your professional advisers as necessary) with respect to anymatter contained herein and not rely on this document as the basis for making any trading, hedging or investment decision.

Standard Chartered Bank and/or any member of the Standard Chartered Bank group of companies or its respective directors,officers, employee benefit programmes or employees, including persons involved in the preparation or issuance of this document,may at any time, to the extent permitted by applicable law and/or regulation, be long or short any securities or financial instruments

referred to in this document and on the website or have a material interest in any such securities or related investment, or may bethe only market maker in relation to such investments, or provide, or have provided advice, investment banking or other services, toissuers of such investments. Within the last three years, Standard Chartered Bank may also have acted as manager or co-manager

for a public offering of securities of issuers referred to herein. Standard Chartered Bank may have received or may expect to receiveremuneration for investment banking services from companies mentioned herein..

Standard Chartered Bank accepts no liability and will not be liable for any loss or damage arising directly or indirectly (includingspecial, incidental, consequential, punitive or exemplary damages) from your use of this document, howsoever arising, and includingany loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with thisdocument, its contents or associated services, or due to any unavailability of the document or any part thereof or any contents orassociated services. This material is for the use of intended recipients only and the contents may not be reproduced, redistributed, orcopied in whole or in part for any purpose without Standard Chartered Bank’s prior express consent. In any jurisdiction in whichdistribution to private/retail customers would require registration or licensing of the distributor which the distributor does not currentlyhave, this document is intended solely for distribution to professional and institutional investors.

Copyright: Standard Chartered Bank 2014. Copyright in all materials, text, articles and information contained herein is the propertyof, and may only be reproduced with permission of an authorised signatory of, Standard Chartered Bank. Copyright in materials

created by third parties and the rights under copyright of such parties is hereby acknowledged. Copyright in all other materials notbelonging to third parties and copyright in these materials as a compilation vests and shall remain at all times copyright of StandardChartered Bank and should not be reproduced or used except for business purposes on behalf of Standard Chartered Bank or save

with the express prior written consent of an authorised signatory of Standard Chartered Bank. All rights reserved. © StandardChartered Bank 2014.

12

asia pacific financial forum – capital market...

Documents