Likewise, experts said that Asia’s nascent domestic credit rating industry must be nurtured if the region wants to develop deep and liquid bond markets.
During a seminar held in Turkey last week, the ADB and global players in the capital markets said that capital markets are not only vital in providing liquidity and investment instruments to the world market.
"They are not only the markets where debt and equity funds are bought and sold, but also an essential source of financial innovation and opportunities," ADB vice-president Khempheng Pholsena said. There is a continued abundance of global liquidity and improved credit quality in mature and emerging financial markets, including a rapid growth of assets in Asia.
"Many of these assets have found their way into global and regional capital markets, as investors seek the best prospects for returns," she said.
However, potential disruptions to market performance loom in the background. These include stubbornly high oil prices and continued global growth imbalances across industrial countries, which increases the risks of a disorderly adjustment of currency and capital markets.
David Fisher, board chairman of Capital International Inc. and Capital Guardian Trust based in Los Angeles, said it is an attractive time for investing in emerging markets even after four years of outperformance.
"Given their attractive growth rates, emerging markets will continue to represent a larger share of the global capital markets," he said. On the other hand, US-based Legg Mason Capital Management chairman and chief investment officer Bill MillerBaltimore said: "I have never seen such angst amid such opportunity as we see it right now."
Miller talked about US investment in a global economic context. He said that the decline in US stock prices this year was closely correlated with the resumption of the rise in the price of the world’s largest and most important commodity – oil. Meanwhile, Asia’s nascent domestic credit rating industry must be nurtured for the region to develop deep and liquid bond markets.
Except in a few countries, bond markets are relatively underdeveloped in Asia. "Establishing the required financial infrastructure and creating an enabling policy environment for the development of vibrant bond markets are key challenges for these (underdeveloped) countries ," said Goh Chye Boon, executive director of the Market & Business Conduct Department of the Monetary Authority of Singapore. "Credit rating agencies play a crucial role in this, as they help bring together investors and issuers in the bond market."
The role of credit rating agencies in bond market development is to provide objective and independent opinions of credit risk that are supported by widely disseminated analyses and other credit research through a simple symbol system.
Along with an institutional framework, concerted efforts are required to make issuers release correct information and facilitate unbiased and trustworthy credit rating industry. Rating agencies in emerging markets should play a developmental role, especially in the early stages of bond market development and in collaboration with government and regulators.