PETALING JAYA: Malaysia’s dominance in the Asean bond market is under threat as Indonesia’s progress gains momentum, according to MARC Ratings Bhd chief economist Dr Ray Choy.
He noted that Malaysia indeed possesses a well-developed bond market, valued at US$433 billion (RM2 trillion), covering both corporate and government bonds, a cornerstone to its leading position.
“Nonetheless, Indonesia’s bond market has progressed faster than those of other Asean markets in recent years, and its market size could even exceed Malaysia’s within the next three years based on current trends,” he told SunBiz.
This prompts important questions about attracting foreign investors to Malaysia’s bond market and promoting their active involvement.
Choy, in pointing out a key internal issue of the local bond market, said, “Apart from the overused narrative of external market volatility, a major internal challenge is a reliance on past successes, leading to tribalism and a protectionist mentality.”
He mentioned that in order for the industry and market to advance, there’s a need to promote competitiveness, and simultaneously expand and strengthen collaborations with other nations, including the exchange of both tangible (hard) and knowledge-based (soft) technologies.
He explained that this approach is necessary due to the inherently global nature of the financial market.
In addition, he said that framing the discussion within the regional context might be narrow-minded.
“This is because Asean’s bond markets pale in comparison to North Asia’s, and there is a massive repository of knowledge and practice from which to learn from the global bond markets,” said Choy.
He stressed the importance of adopting a comprehensive approach to prevent the development of overly biased perspectives favouring any particular stakeholder group.
“To bolster the effectiveness, coherence, and stability of policies, we need to integrate the various capital market plans, impress upon them the role of the bond markets within these plans, and create an integrated platform for constructive dialogue between policymakers, infrastructure support services, rating agencies, research entities as well as buy-side and sell-side stakeholders,” Choy suggested.
He said that policymakers should encourage information service providers, such as regulators, fixed income researchers, credit rating agencies, economists, and academia, to work together in promoting the nation’s capital markets.
“At present, stakeholders are fragmented. Market analysis, beyond basic information, is a public good and underscores the basic functioning and liquidity of the bond market. Sadly, it is underfunded, too often seen as a cost and usually left in the hands of private agents with individualistic agendas,” he added.