Source: Reuters/Murdani Usman
A Balinese dancer takes part in a parade during the 33nd Bali Art Festival in Denpasar
South-East Asia does not get as much spotlight as China and India do, but that is a basic injustice rather than a comment on the region’s performance. The region has demonstrated resilience even as the global economy has struggled and its capital markets boast an impressive growth story, one that shows few signs of slowing.
Indonesia, the region’s giant, is the standout performer. It boasts one of the world’s best-performing economies and has become something of a capital markets darling. Moody’s and Fitch now rate the country investment grade and this has given Indonesian corporate issuers greater access to international markets than ever before. However, not all Indonesian issuers care about this access, because they are issuing freely in the country’s highly liquid and fast-developing rupiah bond market, which is a clear sign of how well the nation is doing. They also have access to a flush bank market.
Neighbouring Malaysia has an equally impressive story to tell as the country’s banks are busy turning themselves from local players to regional ones. CIMB has been on this path for some time now, but, with international banks struggling to maintain their presence in the region, other Malaysian banks like Maybank and are taking advantage through a string of acquisitions and aggressive organic growth policies.
Thailand’s markets may not be as sophisticated, but its local currency bond market continues to impress with the depth of its liquidity. Korean borrowers are again lining up to issue in baht because of the favourable basis swap, but it is their ability to book deals as large as Bht10bn that has been really noticeable. That was just not possible even a few years ago.
In the Philippines, regulators gave done the rarest of things and helped rather than hindered the market. The central bank’s decision to end its moratorium of Lower Tier 2 issues has produced results with a string of successively larger deals in that area.
Even Singapore, which, as a developed economy, is often the region’s odd man out, has a good development story. Hong Kong borrowers once tapped the Singapore dollar bond market purely because of a favourable basis swap. Now, however, the city state plays a fundamental role in Hong Kong issuers’ funding plans and is no longer just a market for them to tap opportunistically.
South-East Asia is a diverse region in terms of economic and capital market development. Some markets in the region may be more developed than others, but that only makes the fact that almost all of them have such positive development stories all the more impressive.
Capital markets are about more than financings. They also express a view on a country or region and, right now, the markets are giving South-East Asia a big thumbs up.
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