Development of the Singapore Bond Market

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Development of theSingapore Bond Market
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Size of the combined Asian economies has
overtaken US, and is projected to exceed Europe
in 2011
3
Size of the combined Asian stock markets is
comparable to the US and Europe
4
International debt securities Amounts Outstanding
in Asia lag behind North America and Europe
Source Bank of International Settlements
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Singapore Bond Market
Adapted from Asian Development Bank Asian Bonds
Online
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SGX Bonds Listings
Source SGX, as of 2 November 2009 (excludes
bonds that have expired)
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Factors for a Successful Bond Market

• Wide variety of international and domestic
  investors
• Free mobility of capital and a stable exchange
  rate
• Strong legal framework to protect investors in
  case of a credit event, credible rating agencies
  and good financial reporting practices
• In the secondary market, transparency of prices,
  deep pool of liquidity and viable hedging
  instruments

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Measures to Develop the Bond Market

• MAS initiatives since 1998
• Created credible benchmark curve
• Encouraged trading in the repo market
• Broadened the quasi-government bond sector
• Liberalized SGD non-internationalization policy
• Upgraded Central Depository capabilities for
  bonds
• Increased price transparency in secondary market
• Enhanced access for individual investors

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Main Challenges

• Asian corporate culture, which has traditionally
  been about the comfort of a banking relationship
  and general distrust of capital markets
• Lack of basic market infrastructure and absence
  of market-supporting institutions
• Difficulty in overcoming inertial arising from
  being a relatively small market in the first
  place larger investors gravitate towards larger
  markets

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• End of Presentation

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Singapores income per capita is fast catching up
with Europe and the US
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SGX Islamic Bond (Sukuk) Listing

• Listed our first Sukuk (Ijara) on 27 April 2007
• Issued by Malaysias largest lender Maybank
• Offering Size US300mn subordinate certificates
• Tenure 10 years
• Investor profile 15 Islamic investors, 85
  Asian investors
• Joint Bookrunners and Lead Managers
  Aseambankers, HSBC and UBS

• Why list on SGX?
• Efficient approval process of 5 working days
• Low cost of listing
• Access to global investors
• Tax exemption for investors on payouts received
  from Sukuks

Leaseback
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SGS Outstanding
Source Monetary Authority of Singapore
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Importance of Bond Market Reforms

• Survey of 45 market makers from ASEAN3 nations
  on the importance of specific initiatives that
  could raise liquidity in local currency bond.

Adapted from Asian Development Bank Asian Bonds
Online, The Market Makers View
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Measures to Develop Bond Market

• Post-1998, MAS has been introducing measures to
  develop the bond market
• Creating a credible government benchmark yield
  curve by increasing issuance volume and regular
  auctions of longer-term (up to 15 years, was
  previously 7 years) SGS
• Lifting size restrictions on repo trading and
  running a SGS repo facility for primary dealers
  to cover short positions in benchmark issues
  arising from market making
• Broadening quasi-government bond sector by
  encouraging statutory boards to issue bonds
• Liberalizing the SGD non-internationalization
  policy and allowing foreign entities to issue
  SGD-denominated bonds
• Upgrading the bond clearing and settlement system
  of the Central Depository, thus enabling RTGS and
  full DvP for bonds
• Launching an electronic OTC bond trading platform
  in conjunction with Bloomberg to increase price
  transparency and accessibility to different
  classes of investors
• Increasing access to individual investors through
  various means

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Tax Incentives

• Qualifying Debt Securities (QDS)
• Debt securities substantially arranged by banks
  in Singapore - fee income earned by financial
  institutions are tax-exempt, interest and trading
  income taxed at 10
• Withholding tax exemptions for non-residents with
  permanent establishments in Singapore
• Approved Bond Intermediary (ABI) Scheme
• ABI status given to financial institutions with
  debt origination and capabilities in Singapore.
  All debt securities arranged by financial
  institutions with ABI status will be treated as
  QDS (see above)
• Gains made from swaps trading taxed at 10

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Improving Individual Access to SGS
Source Monetary Authority of Singapore Annual
Report 2009