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Source:
www.mas.gov.sg |
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Speech by Mr Ong Chong Tee,
Deputy Managing Director, Monetary Authority of Singapore At the
Schroders Investment Seminar, Conrad Hotel, Tokyo |
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An Excerpt |
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"Refocus on Asia" |
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...Since the Asian crisis, many governments
started developing debt capital markets. |
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As a result, Asian countries have increased
issuance of government debt and encouraged issuance of corporate bonds. |
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As at the end of 2005, total amount of
government bonds outstanding was US$833b or more than five times the
level in 1997. |
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Including corporate bonds, total market size
in Asia is now US$1.7 trillion [6]. But beyond this, newer
asset classes are also emerging. I will name three of the more prominent
ones. |
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First, real estate investment trusts or
REITs. These have seen explosive growth, particularly in Singapore and
Hong Kong over the last 3 years. |
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Now more markets are also launching REITs,
including Malaysia, Taiwan and Thailand. The estimated market
capitalization of REITS in Asia is US$37b. |
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In Singapore, the market capitalization
weighted-average returns since IPO have been exceptional at over 30%.
The market has also moved beyond traditional REITs to other products
like shipping trusts and hotels |
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Second, asset-backed debt instruments. This
is partly the result of the REITs phenomenon, which issued a host of
Collateralized Mortgage Backed Securities (CMBS). |
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In Singapore, there is on average,
S$1.5bn of CMBS issuance every year. The underlying assets of debt
instruments have also broadened. For example, Singapore recently
issued debt backed by loans from small and medium enterprises. |
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This is due to the clear regulatory
framework and environment which saw the Monetary Authority of
Singapore (MAS) relaxing the leverage requirement and allowing
market forces to determine the appropriate debt composition. |
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Singapore is also a fertile ground for
CMBS development due to its stable economic environment (sovereign
credit rating AAA/Stable/A-1+) and robust legal and land title
system which have enabled structured finance issuers to raise
highly rated debt. |
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However, growth and diversity in
asset-backed debt instruments have not been limited to Singapore.
In the last 12 months, China issued their very first Credit Linked
Obligations (CLOs) and Thailand issued debt that was backed by
government offices. |
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More assets can potentially be
securitized, particularly in the area of infrastructure finance. A
joint study by the World Bank and ADB estimated that East Asian
countries will need to spend US$250bn per year on infrastructure
over the next five years. |
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Most of these will be in China, India,
Indonesia and Indo-China. For example, in India alone Prime Minister
Manmohan Singh had said that India would need US$150 billion of
investment in ports, roads, power plants and other projects to keep
the economy growing at more than 8% over the next decade. And the
absence of a deep bank loan market suggests that secured debt
financing may be the most efficient route. |
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Third, private equity. According to the
Centre of Asia Private Equity Research, over U$17.6b of fresh
capital flowed into the Asian market, a two and a half fold increase
from 2004. |
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Private equity investments in Asia are
attracting the attention of both pension funds and institutional
investors as the region grows and investors search for a way to
participate in and benefit from this growth. |
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We are seeing a trend where more hedge
fund managers are setting up offices in Asia to look for private
equity opportunities in search of yields. Private equity has become
a vehicle to overcome the limitations of small financial markets and
market inaccessibility. |
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...I believe that asset markets in
non-Japan Asia are in the midst of very exciting transformations.
Steps are being taken to broaden and deepen capital market
liquidity, improve market access and strengthen market
infrastructure. Over the medium term, we can expect an even more
thriving regional market place. |
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[6] ADB Asia Bond Monitor
2006, March 2006 |
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Full Text of Speech |
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Source:
www.mas.gov.sg News Release 4
Jul 2006 |
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FrontPage Edition: Fri 7 July 2006
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