Regional cooperation can be a powerful means to deepen and diversify financial markets through integration, but it needs to be complemented by actions and measures at the domestic level. Integration is an important way to deepen and diversify financial markets. Financial integration, particularly within the region, has increased since the crisis, albeit to varying degrees across financial instruments. Cross border bank claims from within the East Region have increased significantly, even though total bank claims have decreased in most of the East Asian countries (or on average). 
Portfolio equity investments have increased dramatically –from both within the region and the rest of the world—resulting in greater integration of the East Asian equity markets. 
Although bond investments have also increased significantly from both within the EA region and the rest of the world, there is still substantial scope for further integration in local currency bond markets, particularly for the developing East Asian countries. 
Recent regional cooperation efforts have sought to foster greater regional integration of bond market. These efforts include the “demand side” measures through the creation of Asian Bond Funds under the EMEAP which aim to give both retail and institutional investors greater access to local currency bonds, as well as the “supply side” measures under the ASEAN+3 and APEC which aim to facilitate cross border issuance. For a deeper discussion of the current state and policy challenges regarding East Asian financial integration please buy or download (2.3mb.pdf) the report. Additional reading on this topic Beale, Lieven, Annalisa Ferrando, Peter Hördahl, Elizaveta Krylova, and Cyril Monnet 2004 “Measuring Financial Integration in the Euro Area” European Central Bank, occasional paper series no.14, April Ma G. and E.M. Remolona. 2005. “Opening Markets through a Regional Bond Fund: Lessons from ABF2”, BIS Quarterly Review, June 2005. HSBC. 2004. “Guide to Asia ’s Local Currency Bond Markets 2004” May |
RSS