East Asia's bond markets may be set to grow to over $1 trillion by 2004, as the World Bank predicts. And they may be, as one analyst puts it, "the final frontier for the world's investment banks". But right now they are in a primitive condition.
A list of the difficulties of issuing and investing in them makes sober reading antiquated settlement systems, short or non-existent yield curves, unfavourable tax treatment, poor liquidity and a lack of both supply and demand for paper.
Currently, the challenge for banks is to link up borrowers and investors and give both as smooth a ride as possible through often choppy seas. But to give the market what it wants, bankers must understand Asia's business background and why some products succeed while others stumble.
The plain-vanilla fixed-rate bond of medium or long maturity is something of a bit player in Asia. Governments tend...
