Asean stock exchanges to link up trading

MANILA, Philippines - Local investors will soon be able to trade in any of the initial five stock exchanges in the Association of Southeast Asian Nations (ASEAN) region.

The ASEAN stock exchanges agreed recently on a regional mechanism that will route orders from brokers directly to the local exchanges, according to the Asian Development Bank (ADB).

The agreement will initially involve five countries, each of which will list their top 30 stocks on a single computer screen, known as the ASEAN Bulletin Board. The five countries are Indonesia, Malaysia, Philippines, Singapore and Thailand.

The ADB provided technical assistance for the project and worked closely with regional stock exchanges and regulators to develop the system.

Dubbed the ASEAN Common Exchange Gateway, the alliance is expected to help pave the way for the future development of back-end linkages involving clearing, settlement, and depositary arrangements, the ADB said.

Its ultimate objective is to link ASEAN capital markets by way of a single access point for investors and issuers to any of the exchanges, the ADB added.

ADB’s Southeast Asia Department director for financial sector and public management Jaseem Ahmed said the initiative will create the market infrastructure and regionally focused products and intermediaries to promote ASEAN as an asset class and allow distribution of listed products on ASEAN exchanges.

“None of the ASEAN exchanges is individually large, but together they will have the scale and liquidity to be globally competitive,” Ahmed said.

The ASEAN region’s cross-border portfolio investment is estimated to reach $180 billion in 2006 and is expected to reach $540 billion by 2015.

The new alliance comes three weeks after ASEAN capital markets regulators agreed on a road map to fully integrate ASEAN capital markets by 2015. ADB has been helping regulators develop the integration plan by providing policy and technical support through the ASEAN Capital Markets Forum.

The ADB said Southeast Asian countries have made substantial progress in strengthening financial markets while advancing regional cooperation and integration. Financial markets have become deeper and more diversified.

“There is a wider range of products and intermediaries, and much has been done to strengthen financial infrastructure,” it added.

With stiffer competition among world stock exchanges, the emergence of alternative trading networks and rapid growth in trading volumes internationally, Southeast Asian countries agree that regional integration is needed to expand their market capacity and scale so that they can compete globally.

“Cooperation and integration thus feature as key objectives within ASEAN. Countries expect this will require a continued focus on strengthening and liberalizing domestic capital markets to build capacity for domestic players to compete effectively and to manage risks,” the ADB added.