EAEU countries are invited to be friends with bonds

The presence of developed and efficient domestic capital markets in countries that are trading partners contributes to their more sustainable development, reduces the cost of borrowed resources and financial risks, and also expands the investor base for borrowing countries, according to ACRA rating agency’s study “Asia’s experience for the Russian market “.

Experts point out that the EAEU development strategy provides for the creation of a common financial market by 2025. At the same time, domestic debt capital markets of the Union countries are still small. The largest volume of the bond market in the national currency relative to the size of GDP is in Kazakhstan (33% of GDP), in Russia the ratio is 26.2%, in Armenia and Belarus – less than 25% (23.6% and 21.1%).

In order to increase the indicators, ACRA proposes to conduct mutual placements of bonds in national currencies. For example, the EAEU country can sell attracted rubles on its market, which is supposed to reduce currency risks and, in the long term, risk premiums. It is also proposed to create a mechanism to support the placement of corporate debt in national currencies and increase the level of information disclosure by creating a single data portal.

An example is The Asian Bond Markets Initiative (ABMI), which was launched in 2002 by ASEAN countries, China, Japan and South Korea to develop domestic borrowing markets and reduce dependence on foreign sources of capital. As part of this mechanism, the countries harmonized legislation, introduced loan and investment guarantees, and launched a single portal. In addition, support was given to the use of international reporting standards, the development of the derivatives market, the repo market and the formation of a credit culture, including through the creation of credit risk databases. As a result, since 2002, the domestic market for government and corporate bonds has grown in all participating countries. In Thailand, it doubled, and in Vietnam it was created almost from scratch. Based on 2021 data, in relation to GDP, the largest market sizes are in Malaysia (125% of GDP) and Singapore (114%). They are followed by Thailand (about 91% of GDP), the Philippines (50%), Vietnam (42%) and Indonesia (31% of GDP).

Tatyana Edovina