A landmark issue in Thailand’s local bond market last year has underlined the challenges in the integration of South-East Asia’s capital markets.
Japan’s Mizuho Bank sold Bt3bn (US$85m) of three-year 2.33% bonds in September, completing the first under the ASEAN+3 multi-currency bond issuance framework (AMBIF).
Siam Commercial Bank was sole lead manager for the offering. The notes were placed in Thailand and also listed on the Tokyo Pro-Bond market.
Mizuho’s long-awaited debut came weeks after regulatory agencies in Malaysia, Singapore and Thailand implemented the framework for the ASEAN common prospectus, which essentially provides for borrowers to file only one standard set of documents to sell debt in the three markets.
The deal, however, met a cautious response from investors and remains the sole issue under the AMBIF template.
“We learned several lessons from the first Thai baht issue,” said Tomo Yamadera, principal financial sector specialist at the ADB and head of the Asian Bond Market Forum, an ASEAN+3 initiative.
“What we try to do is introduce international market practice into the domestic market, and sometimes through a lack of experience people resist – even though regulators may be pushing this initiative.”
The AMBIF concept has had a long and slow gestation since it was first proposed by ASEAN ministers in 2012, and Thailand raised further questions for potential cross-border financings during the global market sell-off earlier this year, with a restriction that any proceeds must be used “in baht in Thailand”.
Yamadera does not see that as a hurdle to future AMBIF issues, since the framework is mainly intended for ASEAN companies who want to increase their local funding for their foreign subsidiaries.
“ASEAN currencies depreciated against the US dollar last year but within ASEAN it was relatively stable. Many companies who used to manage their treasury in US dollars are now wondering how they can manage their growing exposures in the region,” he said.
Regulators elsewhere have expressed their strong support for the format, notably in the Philippines and Malaysia, but even with policymakers on board deals have yet to materialize.
“It is importance to raise awareness in the market,” said Yamadera. “Unfortunately market turbulence over the last year has made people cautious to look at new deals, but once the market has stablised we are very much hoping that we can create another deal.”
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