Cross-border bond issuance initiative came to the fore as Asean moves closer to capital market integration

Sep 06 2010
The Asean capital market is poised to offer plain vanilla debt securities, including bonds and mutual funds to retail investors, by the end of 2012, with the ability to offer them the full suite of debt securities by 2013. Thirachai Phuvanatnaranubala, secretary-general of the Securities and Exchange Commission of Thailand, has said that this was in line with the Asean Capital Markets Forum, an initiative aimed at integrating the Asean capital market by 2015.


The vision

As part of the Asean cross-border bond initiative, bond issuers in Asean would be able to offer their debt issues to the various jurisdictions in the region using just one single prospectus. Thirachai told Complinet that this was another vision towards which Thailand was now working as part of its remit under the Asean Capital Markets Forum. Alongside this initiative, he said that the Thai SEC was also in the throes of seeking agreement from its allies to put in place a set of standards which would encompass disclosure, accounting and auditing.

Thailand's remit under the Asean Capital Markets Forum was to spearhead cross-border bond issuance and mutal fund distribution, while Singapore led the effort on mutual recognition of market profession, including financial advisers, credit rating agencies and auditors. Indonesia had been charged with revamping the legal framework that would allow actions on cross-border disputes to be taken more easily. Malaysia, on the other hand, was responsible for the work on the equity side to promote secondary listing and corporate governance.

Setting standards

Thirachai said that, during their work to determine disclosure and transparency standards for the governance of Asean cross-border bond issuance, the Asean regulators had referred extensively to the guidelines on cross-border offering set by the International Organisation of Securities Commissions. The Asean Capital Markets Forum has also been pushing for mutual recognition of credit rating agencies in the Asean region, and this would also form part of the regulatory framework for cross-border issuance. Thirachai said, however, that this could only be realised once credit rating agencies had been regulated. Therehad been a private sector initiative from Standard & Poor's, which had developed an Asean-scale ratings that now enabled ratings for each country to be comparable but it remained early days if the Asean Capital Markets Forum would adopt that standard. "We will be using international guidelines to craft the Asean standards," Thirachai added.


The Asean Capital Markets Forum has sought to develop and integrate the region's capital market by 2015. It was part of the bigger "Asean Economic Community Blueprint 2015" aimed at establishing Asean into a single market that would allow freer flow of goods and services, investments, labour and capital. The call for an integrated regional market had followed recognition that the region's capital markets were individually small characterised by limited products, low liquidity and high transaction costs.

The Asean brand

Thirachai said: "We are delivering an Asean brand, and we are trying to push Asean countries to adopt international standards and best practices so that there will be a better recognition of the Asean brand that will also inspire investors' confidence in Asean. The Asean Capital Markets Forum has shown strong commitment to enhance the attractiveness of Asean as a combined capital market for fundraising, as well as underlining Asean securities as an attractive asset class by raising the disclosure standards among Asean members to an international level. "He said the Asean cross-border bond issuance would benefit the countries in the region as well as issuers. "It means that we recognised the fact that the capital markets development in the various countries [in the region] cannot be at the same level. Some countries, such as Singapore, would already have the competitive edge but others would need to develop further, and the cross-border bond issuance initiative would create more opportunities for everyone."

From the issuers' perspective, cross-border bond issuance would enable them to tap into funds easily while reducing cost of funds. Thirachai said Asean regulators had recognised that some of the regulations governing the region's financial services were far more stringent than those of their western counterparts. "They [the rules here] protect investors far more. That perhaps stemmed from the fact that Asean regulators viewed investors in Asia as less sophisticated and as needing more protection, but that has also hampered cross-border issuance as that would mean more cost to issuers," he said.

'Asean and plus standards'

According to Thirachai this was the motivation behind the establishment of the "Asean and plus standards scheme" for multi-jurisdictional offerings of securities in the region. The scheme, now adopted by Malaysia, Singapore and Thailand, aimed to facilitate multi-jurisdictional offerings of plain equity and debt securities by allowing issuers to comply with one single set of common disclosure standards, known as the "Asean standards", coupled with additional requirements prescribed by each jurisdiction, known as the "plus standards". Cross-border issuers would be subject to a common set of disclosure requirements based on the IOSCO standards, with additional disclosure ("plus standards") as required by individual jurisdictions under their particular market practices, laws and regulations. They would also be required to adopt fully the accounting and auditing standards set out in the International Financial Reporting Standards and the International Standards on Auditing. The overall scheme, according to Thirachai, aimed to bring greater efficiency and cost savings for issuers undertaking cross-border offerings.

As cross-border activities are expected to grow following the capital market integration, the Thai SEC said that it would also be working closely with the Asean Capital Markets Forum in terms of supervision and enforcement. "This is to ensure that investors are duly protected from cross-border fraud and misconduct, that the integrity of the market is high and that systematic risk is well-managed," it added.