Newspaper article The Christian Science Monitor

East Asian Bond Market to Hit Trillion-Dollar Mark

Newspaper article The Christian Science Monitor

East Asian Bond Market to Hit Trillion-Dollar Mark

Article excerpt

ECONOMISTS are calling this the age of Asian bonds.

The East Asian bond market is poised to grow rapidly in the next 10 years and will mostly likely cross the trillion-dollar mark by 2004, according to a major study released today by the World Bank.

At the end of 1989, the total face value of all outstanding East Asian bonds stood at about $167 billion; by the end of 1994, this market had more than doubled to about $338 billion, according to the report titled "The Emerging Asian Bond Market."

In comparison, at the end of 1993, the outstanding dollar volume of 21 major industrial country bond markets stood at about $17 trillion, the report states.

East Asia is a major economic powerhouse, with a population of 1.6 billion and a combined gross domestic product of $1.3 trillion in 1993. Financing the region's rapid growth over the next decade will require mobilizing massive resources for corporate expansion, dominated by capital-intensive manufacturing, upgrading existing infrastructure stock, expanding services, and building houses, the report states.

Unlike industrial country bond markets, which are dominated by government-issued securities, East Asian bond markets (except in China and the Philippines) are expected to be dominated by the corporate and state-owned enterprise sectors. In 1994, East Asian governments were the main issuers of bonds and accounted for 45 percent of all outstanding bonds. But this profile, the report says, is likely to change dramatically in the coming decade. The government-bond sector is expected to dip to 33 percent by 1999 and 23 percent by 2004.

Corporate securities will be the fastest-growing segment of the bond market, the report says. Bonds issued by this sector are projected to grow from $77 billion in 1994 to more than $500 billion by 2004, with most of the issuers coming from Malaysia, South Korea, and Thailand.

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