Transcript Development of the Singapore Bond Market

Development of the
Singapore Bond Market
Size of the combined Asian economies has overtaken US,
and is projected to exceed Europe in 2011
25.0
Asia
GDP at current prices (US$ trillion)
20.0
European Monetary
Union + Switzerland
15.0
US
10.0
5.0
0.0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010E
2012E
2014E
Source: IMF World Economic Outlook database
2
Size of the combined Asian stock markets is comparable
to the US and Europe
20.0
US
Market cap (US$ trillion)
16.0
12.0
8.0
European Monetary
Union + Switzerland
Asia
4.0
0.0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: World Federation of Exchanges
3
International debt securities Amounts Outstanding in Asia
lag behind North America and Europe
International Debt Securities, Amounts Outstanding (US$ trillions)
18
16
14
12
Africa & Middle East
Asia & Pacific
Europe
Int. organisations
Latin America & Caribbean
North America
10
8
6
4
2
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Jun
2009
Source: Bank of International Settlements
4
Singapore Bond Market
Bonds Outstanding in the Singapore Market (US$ billions)
80
70
60
50
Foreign CCY Bonds
40
Local CCY Bonds - Govt
Local CCY Bonds - Corp
30
20
10
0
Dec 95 Dec 96 Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Sep 08
Adapted from Asian Development Bank – Asian Bonds Online
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SGX Bonds Listings
Total number of Bonds
1200
1192
1000
600
779
525
400
200
987
1167
800
403
0
2004
2005
2006
2007
2008
02-Nov-09
Year 2007
Year 2008
As at end July 2009
254
126
74
Total Funds raised (S$)
106bn
47bn
41bn
Average funds raised (S$)
417mil
374 mil
554 mil
New Bond Listings
Source: SGX, as of 2 November 2009 (excludes bonds that have expired)
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Factors for a Successful Bond Market
• Wide variety of international and domestic investors
• Free mobility of capital and a stable exchange rate
• Strong legal framework to protect investors in case of a credit event, credible
rating agencies and good financial reporting practices
• In the secondary market, transparency of prices, deep pool of liquidity and viable
hedging instruments
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Measures to Develop the Bond Market
• MAS initiatives since 1998
• Created credible benchmark curve
• Encouraged trading in the repo market
• Broadened the quasi-government bond sector
• Liberalized SGD non-internationalization policy
• Upgraded Central Depository capabilities for bonds
• Increased price transparency in secondary market
• Enhanced access for individual investors
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Main Challenges
• Asian corporate culture, which has traditionally been about the comfort of a
banking relationship and general distrust of capital markets
• Lack of basic market infrastructure and absence of market-supporting institutions
• Difficulty in overcoming inertial arising from being a relatively small market in the
first place – larger investors gravitate towards larger markets
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End of Presentation
10
Singapore’s income per capita is fast catching up with
Europe and the US
60.0
Singapore is where US was in 2003, and
where developed Europe was in 2007
US
50.0
GDP per capita (US$`000)
European Monetary
Union + Switzerland
Singapore
40.0
Advanced Asia
30.0
20.0
10.0
0.0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010E
2012E
2014E
Source: IMF World Economic Outlook database
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SGX Islamic Bond (Sukuk) Listing
• Listed our first Sukuk (Ijara*) on 27 April 2007
• Issued by Malaysia’s largest lender Maybank
• Offering Size: US$300mn subordinate certificates
• Tenure: 10 years
• Investor profile: 15% Islamic investors, 85% Asian investors
• Joint Bookrunners and Lead Managers: Aseambankers, HSBC and UBS
Why list on SGX?
 Efficient approval process of 5 working days
 Low cost of listing
 Access to global investors
 Tax exemption for investors on payouts received from Sukuks
* Leaseback
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SGS Outstanding
SGS Outstanding (US$ billions)
90
80
70
60
50
OUTSTANDING BONDS
OUTSTANDING T/BILLS
40
30
20
10
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Sep
Source: Monetary Authority of Singapore
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Importance of Bond Market Reforms
Bond Market Reforms - Government
Increasing diversity of investors
Avg
3.5
CN
3.8
HK
3.5
ID
3.2
JP
3.3
KR
3.0
MY
4.0
PH
3.8
SG
3.5
TH
3.3
VN
3.6
Increased availability of hedging products
3.3
3.3
3.0
3.4
3.8
2.7
3.7
3.4
3.8
3.0
3.4
Increasing intraday price transparency
3.1
2.8
3.0
3.6
3.5
3.0
3.3
3.0
3.3
2.0
3.8
Improving repo markets
2.9
2.5
2.0
3.6
2.5
2.7
3.3
3.0
2.8
3.0
3.6
Increasing tax incentives
2.7
1.5
3.0
3.4
2.5
2.3
2.7
3.2
3.3
2.3
2.8
Improvements to clearing and settlement
2.7
1.8
2.5
3.0
3.8
2.7
1.7
3.2
3.3
2.3
2.8
Mandatory bid-ask spreads by market makers
2.5
2.3
3.0
3.3
2.0
2.3
2.0
2.5
2.5
2.5
2.6
Bond Market Reforms - Corporate
Increasing diversity of investors
Avg
3.4
CN
3.8
HK
3.0
ID
3.4
JP
3.0
KR
3.7
MY
3.8
PH
3.6
SG
3.3
TH
3.0
VN
3.4
Increased availability of hedging products
3.1
3.5
3.0
2.8
2.8
2.7
3.8
3.4
3.3
2.8
3.2
More consistent secondary market pricing
3.1
3.0
3.5
3.4
3.3
2.3
3.0
3.0
3.3
2.8
3.2
Greater access to credit derivatives
3.1
3.5
3.0
2.6
3.3
3.7
3.3
3.8
2.3
2.3
3.0
Increasing tax incentives
2.9
2.5
2.5
3.6
3.3
2.5
2.8
3.4
3.7
2.5
2.6
Credit rating harmonization
2.8
3.0
3.0
2.8
2.8
1.7
3.3
3.0
2.7
2.8
3.4
Introducing pricing agencies
2.7
3.3
2.5
3.2
2.8
1.7
2.8
2.8
2.0
2.5
3.2
Greater multilateral issuance
2.6
3.0
3.0
2.4
2.5
1.7
3.0
2.8
2.0
2.5
3.4
Greater access to guarantees
2.6
3.3
3.0
2.4
2.8
1.7
3.0
2.8
2.0
2.0
2.8
Survey of 45 market makers from ASEAN+3 nations on the importance of specific initiatives that could
raise liquidity in local currency bond.
Adapted from Asian Development Bank – Asian Bonds Online, The Market Maker’s View
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Measures to Develop Bond Market
•
Post-1998, MAS has been introducing measures to develop the bond market:
1. Creating a credible government benchmark yield curve by increasing issuance volume
and regular auctions of longer-term (up to 15 years, was previously 7 years) SGS
2. Lifting size restrictions on repo trading and running a SGS repo facility for primary
dealers to cover short positions in benchmark issues arising from market making
3. Broadening quasi-government bond sector by encouraging statutory boards to issue
bonds
4. Liberalizing the SGD non-internationalization policy and allowing foreign entities to
issue SGD-denominated bonds
5. Upgrading the bond clearing and settlement system of the Central Depository, thus
enabling RTGS and full DvP for bonds
6. Launching an electronic OTC bond trading platform in conjunction with Bloomberg to
increase price transparency and accessibility to different classes of investors
7. Increasing access to individual investors through various means
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Tax Incentives
• Qualifying Debt Securities (QDS)
• Debt securities substantially arranged by banks in Singapore - fee income earned by
financial institutions are tax-exempt, interest and trading income taxed at 10%
• Withholding tax exemptions for non-residents with permanent establishments in
Singapore
• Approved Bond Intermediary (ABI) Scheme
• ABI status given to financial institutions with debt origination and capabilities in
Singapore. All debt securities arranged by financial institutions with ABI status will be
treated as QDS (see above)
• Gains made from swaps trading taxed at 10%
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Improving Individual Access to SGS
Source: Monetary Authority of Singapore Annual Report 2009
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