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Asia's capital markets seeing strong growth: MAS

Singapore

THE expansion of Asian enterprises and demand for infrastructure development in the region will drive financing and capital raising activities in Singapore, Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said on Tuesday.

Speaking at the Nomura Investment Forum Asia 2018 at the Ritz Carlton Singapore, he noted that more Asian companies are expanding regionally and globally.

The need to fund this expansion has led to a surge in capital raising in Asia and increased the depth and diversity of Asian assets.

The numbers show it.

Firstly, dollar bond issuance by Asia-excluding-Japan companies climbed to a record high of around US$400 billion last year, up 40 per cent from 2016. Also, about one-third of equity raised through initial public offerings globally in 2017 was in the Asia-Pacific.

Asia is also becoming a major destination for venture capital (VC) and private equity (PE) investments. Last year, VC and PE investments into Asia reached US$160 billion, accounting for 30 per cent of global investments, surpassing Europe for the first time.

Coupled with the close to 7,000 startups in South-east Asia alone, opportunities abound for private investments in the region, Mr Menon said.

Secondly, the demand for infrastructure financing in Asia is outpacing countries' funding capacity. According to the Asian Development Bank, Asia will need around US$1.7 trillion annually in infrastructure financing between now and 2030 to sustain economic growth. Currently, more than 90 per cent of infrastructure investment is financed by governments.

"This is not sustainable if the demand for infrastructure is to be met. The challenge for governments in Asia is this: to make infrastructure more attractive to private capital," he said.

At their recent meeting in Singapore, Asean finance ministers agreed to accelerate infrastructure development through mobilising private capital. This means making infrastructure financing a mainstream asset class.

"The prospects are good. There is a strong pipeline of projects in the transport and energy sectors, diversified across the Asean countries. We have seen some early success," Mr Menon said.

The debut of a project bond issuance by PT Paiton, Indonesia's second-largest independent power producer, is one example that reflects growing demand for Asian infrastructure debt.

To facilitate the take-off of Asian infrastructure financing, Singapore is working with industry partners to securitise a pool of brownfield regional project finance loans from banks into a collateralised loan obligation that institutional investors, including insurance companies and pension funds, can invest in.

It is also creating investment benchmarks to make infrastructure an investable asset class.

"This will allow investors to compare the returns of privately-held infrastructure debt and equity against other asset classes," he said.

As a whole, Singapore is also continuing to position itself as an Asian hub for fund management and domiciliation.

For example, by next year, it will introduce a new corporate structure for investment funds - the Singapore Variable Capital Company - which will allow asset managers to achieve greater synergies through co-locating their management and domiciliation activities.

The government has also simplified regulations to facilitate the activities of VC and PE managers, and is in the midst of strengthening the ecosystem for family offices through deepening the quality and capability of service providers such as lawyers, consultants and tax advisers that cater to them.

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