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Just as the economies of the Asia-Pacific region are diverse, so are its bond markets. The level and direction of development varies significantly - from Japan's huge and highly advanced but largely domestic-focused market to Thailand's small but rapidly developing market.
In between is Australia's moderately sized but open market, which enjoys a high level of international issuer and investor participation.

For the region to flourish as a world-class player - and provide growth opportunities for issuers, investors, market makers, and providers of infrastructure - Asia-Pacific's developing bond markets will have to confront several issues. A key need is to address the policies that have led to the development of two distinct markets: a local currency market and an offshore market that's denominated in U.S. dollars and euros and is the province of only the largest players. Attracting international issuers and investors will enable local currency markets to develop greater depth and efficiency, allowing larger borrowers to reduce their reliance on the offshore market and domestic banking systems for debt funding. It will also speed up the integration of the region's markets.

Developing Versus Developed: Defining the Terms

The region's markets can be loosely placed into two groups: developed (Japan, Hong Kong, Singapore, and Australia & New Zealand [A&NZ]) and developing (China, Korea, Taiwan, Malaysia, Thailand, Indonesia, and India). Although it may not fall within the strict geographic definition of the Asia-Pacific region, India is included in this latter group because it's the other large and developing market in close proximity.

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* Contributed by: -
Philip Bayley is Primary Credit Analyst with Standard & Poor's, Melbourne.