Report on ASEAN Initiatives
Presentation to 25th AOSEF General Assembly
Taipei, Taiwan
April 15, 2006
Introduction of ASEAN initiatives:
ASEAN CAPITAL MARKET’S PRESENCE IS LIMITED
As of December 31, 2005
Equity market
Bond market
Domestic
Market Cap
(Billion USD)
Euronext
Hong Kong
Exchange &
Clearing
Value Traded
(Billion USD)
2,707
1,055
Korea
Exchange*
718
ASEAN – 5***
683
Turnover ratio
(Percent)
107
2,901
178
44
464
**
168
1,204
313
Value Traded
(Billion USD)
46
355
7
Almost equivalent to Borsa Italiana**** in Europe
* Includes KOSDAQ market data
** Approximately USD 1.4 million
*** Included Bursa Malaysia, Jakarta Stock Exchange, Philippine Stock Exchange, Singapore Exchange and Stock
Exchange of Thailand
**** With domestic market capitalization of ~USD 798 billion
Source: World Federation of Exchanges
1
Introduction of ASEAN initiatives:
MAJOR OBSTACLES WERE IDENTIFIED
Common trading
hours
Trading hours
Major obstacles
• Regulations governing capital account mobility do not allow full capital market
integration
• Standards (e.g., disclosure requirements, credit rating) are different among
exchanges, leading to difficulties in comparing and benchmarking companies
• System and platform (e.g., trading platform, clearing system) are not compatible
among exchanges
• Trading hours do not overlap – only one common trading hour
Trading times *
Market
9.00
9.30
10.00 10.30 11.00 11.30 12.00 12.30 13.00 13.30 14.00 14.30 15.00 15.30 16.00 16.30 17.00
Indonesia
Malaysia
Philippines
Singapore
Thailand
* In GMT+6 time zone
Source: World Federation of Exchanges; FTSE/ASEAN index series research report – September 2005
2
Introduction of ASEAN initiatives:
THEREFORE, VARIOUS ASEAN WORKING PROJECTS WERE
ESTABLISHED…
ASEAN Finance Ministers Meeting (AFMM)
Vision:
To develop and promote cooperation in the areas of finance for the benefit of Member States
Objectives:
• Promote mutual understanding of each other's economic situation and policies so as to
provide better cooperation in the area of economics and finance
• Strengthen their efforts in addressing the economic challenges facing them with a view to
promoting stable and sustainable economic growth in each Member State and in the region
ASEAN Capital Markets Forum
(ACMF)
Objectives:
• Provide a high-level forum for
ASEAN members to discuss
capital market issues of common
concern
• Actively involve in the initiatives
discussed during the meeting
which would be further
communicated to ASEAN policy
makers for strategic decision
making in relation to capital
market developments
Source: www.aseansec.org; www.mfa.go.th
Linkages Taskforce
ASEAN 100 Taskforce
Vision:
To develop an interlinked ASEAN
securities market place by 2010
Objectives:
• Brand ASEAN as an asset class
• Broaden exposure of ASEAN
companies
• Facilitate investments into ASEAN
companies
• Act as a benchmark for ASEAN
performance
• Efficient cross border market
access for trading, clearing and
settlement
• Standardization in market
practices
• An attractive investment
proposition to international
investors
3
Introduction of ASEAN initiatives:
…AND HAVE WORKED ON INITIATIVES THAT COULD BE GROUPED INTO
2 MAJOR STRATEGIC THRUSTS
Strategic thrust
Description
1
• Develop models of alliances and linkages in both equity and bond market
among ASEAN exchanges and explore with various domestic agencies to
ensure that they are implementable
• Harmonize regional standards for
–Disclosure requirements
–Accounting and auditing standards
–Comparability of credit rating
–Distribution rules
–Cross-recognition of qualifications on education and experience of
capital market professionals within the region
Foster alliances
and linkages
2
Strengthen
ASEAN’s profile
as an asset class
• Launch asset-class “ASEAN” products in both equity and bond market, e.g.,
ASEAN indices
• Encourage private sector efforts to develop ASEAN-related financial
products, e.g., ETFs on ASEAN indices, mutual funds based on Asianissued bonds
• Enhance international interest as an attractive investment destination to the
international investor community by arranging/participating in international
events (e.g., roadshow in Europe, IMF/WB meetings)
Source: www.aseansec.org; Progress report on the roadmap for integration of ASEAN
4
Status and next steps of the initiatives:
1 FOSTER ALLIANCES AND LINKAGES
Market
Equity
market
Bond
market
What has been done
Next steps
• Identified a model of alliances and linkages among
ASEAN exchanges in a form of regulatory request
list to facilitate:
–Trading of securities listed on exchanges
–Clearing and settlement of exchange linkage
trades
–Dissemination of corporate info to all investors
–Regulators to act on market misconducts
• Circulating the request list by exploring with
domestic agencies to ensure its practicality
• Agreed to work on harmonizing regional standards,
e.g., disclosure, accounting&auditing standards
• Commenced the study on Southeast Asian Equity
markets via a Regional Technical Assistance
program* with support from ADB**
• Implement the regulatory
request list by 2010
• Continue the work to harmonize
regional standards
• Set up “Regional Bond Market Linkages” working
group
• Completed preliminary market consultation to
indicate models of linkages in accelerating bond
market development
• Further study and develop a
proposed model of linkages
• Develop an E-Bond Trading
Platform to be used among
ASEAN exchanges
* To identify key areas of co-operation and to put a report outlining the impediments with practical recommendations
** Undertaken by ADB-appointed consultants from February to December 2006
Source: Progress report on the roadmap for integration of ASEAN
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Status and next steps of the initiatives:
2 STRENGTHEN ASEAN’S PROFILE AS AN ASSET CLASS
Market
Equity
market
Bond
market
What has been done
Next steps
• Launched 2 ASEAN indices as follows:
–FTSE ASEAN 180 as a benchmarking
index
–FTSE ASEAN 40 as a tradable index*
• Agreed to jointly develop an ETF** on
FTSE ASEAN 40 to attract investors who
wish to hold a portfolio of ASEAN equities
• Participated in international events (e.g.,
roadshows, IMF/WB meetings) to enhance
international interest in ASEAN
• Launch an ETF on FTSE ASEAN 40
• Encourage private sector efforts to
develop ASEAN-related financial
products
• Developed description of required
supporting environment to facilitate the
cross-border distribution of mutual funds
based on Asian-issued bonds
• Develop the guidelines and action
plan to finally possess the required
supporting environment
* Suitable for institutional and retail funds, exchange-traded funds and derivatives contracts
** Exchange-traded fund
Source: Progress report on the roadmap for integration of ASEAN
6
Status and next steps of the initiatives:
FTSE/ASEAN INDICES WERE SUCCESSFULLY LAUNCHED IN 2005
FTSE/ASEAN Indices
 Created from all eligible stocks within the FTSE All-World Universe
FTSE/ASEAN Index (Benchmark)
 Provides an indication of the financial performance of the largest companies within the region
 Consists of 180 constituents from the five countries represented: Indonesia, Philippines, Singapore,
Malaysia and Thailand
FTSE/ASEAN 40 Index (Tradable)
 Designed to support the launch of financial derivative products to give exposure to the five major
markets of South East Asia
 Top 40 constituents from the FTSE/ASEAN Index by market capitalization form the tradable index
Information of FTSE/ASEAN 40
As of April 6, 2006
No of stocks by country
7
Indonesia
Country weightings (% of investable market cap)
Unit: Percent
100% = ~USD 146 thousand
12
Malaysia
1
Philippines
11
Singapore
9
Source: www.ftse.com
Indonesia
Thailand
16
15
19
49
Thailand
Singapore
1
Malaysia
Philippines
7
END OF DOCUMENT
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