The expansion of Asian enterprises and demand for infrastructure development in the region will drive financing and capital-raising activities in Singapore, Monetary Authority of Singapore (MAS) managing director Ravi Menon said yesterday.
Speaking at the Nomura Investment Forum Asia 2018 at the Ritz-Carlton Millenia 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.
First, dollar bond issuance by companies in Asia - excluding Japan - climbed to a record high of around US$400 billion (S$534 billion) last year, up 40 per cent from 2016. Also, about one-third of equity raised through initial public offerings globally last year was in the Asia-Pacific.
Asia is also becoming a major destination for venture capital and private equity investments. Last year, such investments in the region reached US$160 billion, accounting for 30 per cent of global investments and surpassing Europe for the first time.
Coupled with the close to 7,000 start-ups 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 about 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.
Value of dollar bond issuance by firms in Asia - excluding Japan - last year, up 40 per cent from 2016.
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," Mr Menon said.
The debut of a project bond issuance by Paiton, Indonesia's second-largest independent power producer, is one example that reflects growing demand for Asian infrastructure debt.
To facilitate more 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.