The Hindu Business Line : `Asian financial markets not ripe for integration'

Finding that the individual financial markets in the Asian countries are currently quite underdeveloped, experts at a seminar during the Asian Development Bank (ADB) annual meeting here favoured developing a strong local bond market in each of these Asian economies before going in for integration of regional financial markets.

The Chief Representative at the Bank of International Settlements, Mr Robert N. McCauley, said the financial integration in Asia varies across the markets. In bond market, risk is that the regional integration takes place in offshore US dollar market, which encourages currency mismatches. He was in favour of developing local currency bond market, especially corporate bond market.

He was addressing a sponsored seminar of State Bank of India (SBI) on `Integration of Asian Financial Markets,' here on Saturday.

According to him, the risk is that regional integration of bond markets happens in US dollar market. "This would entail risk of currency mismatches if firms have to borrow dollars to access global portfolios and to obtain longer maturities. Best and largest companies accessing offshore rather than onshore funding would leave domestic currency corporate bond market without its best and most liquid issues."

Mr McCauley said the policy imperative is to build up national bond markets in local currency. Against the threat of global markets `cherry-picking,' regional efforts would have to build up domestic bond markets.