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Facilitating Foreign Exchange Risk Management for Bond Investments in ASEAN+3

Author

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  • Asian Development Bank (ADB)
  • Asian Development Bank (ADB)

    (Sustainable Development and Climate Change Department, ADB)

  • Asian Development Bank (ADB)

    (Sustainable Development and Climate Change Department, ADB)

  • Asian Development Bank (ADB)

Abstract

The Asian Development Bank (ADB) has been working closely with the Association of Southeast Asian Nations (ASEAN) and the People’s Republic of China, Japan, and the Republic of Korea—collectively known as ASEAN+3—to foster the development of local currency bond markets and facilitate regional bond market integration under the Asian Bond Markets Initiative (ABMI). ABMI was launched in 2002 to strengthen the resilience of the region’s financial system by developing local currency bond markets as an alternative source to foreign currency denominated short-term bank loans for long-term investment. Bond investors typically have a long position in local currency bond markets. To manage their foreign exchange (FX) risk, they may want to hedge that exposure for a period of time. They also want to be sure they can easily convert the local currency to dollars upon the sale of a bond. This study was undertaken under ABMI and funded by the Government of Japan. It reviews the FX and FX hedging markets in ASEAN+3 as they relate to cross-border investments in local currency bonds, and makes recommendations to facilitate the development of the markets and FX risk management.

Suggested Citation

  • Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB), 2015. "Facilitating Foreign Exchange Risk Management for Bond Investments in ASEAN+3," ADB Reports RPT157560-2, Asian Development Bank (ADB).
    • Handle: RePEc:asd:wpaper:rpt157560-2
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    Cited by:

    1. Megan Garner, 2017. "Foreign Exchange Derivative Markets in Asia," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 77-83, December.

    More about this item

    Keywords

    Regional cooperation; Regional integration; ASEAN+3; Local currency bonds; and Foreign exchange risk management;
    All these keywords.

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