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This paper reviews the development of fixed-income securities markets in the Pacific rim economies following the onset of the Asian currency crisis in 1997 through to the end of 2000. It provides a background for comparing the market structure in the different capital markets within the region and discusses the issues pertinent to capital market development. The lack of domestic capital markets with sufficient depth means that significant movements of capital into or out of certain countries will lead to distortions in the cost of capital and this will affect long-term economic development. Owing to the lack of transparency in their corporate sectors, Asian capital markets, and in particular bond markets, generally display significant systemic risk in the form of country risk for foreign investors. Overall, debt markets in the Asian and Pacific region are much smaller than equity markets and markets and regulatory systems are fragmented. There is a need, therefore, to build stronger legal and regulatory frameworks, to improve investor protection, to encourage adequate disclosure of information and to foster best practices by listed companies and financial intermediaries. The paper identifies the factors that will influence future bond market development.

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