Within the ASEAN region, more than 90% of cross-border portfolio investment flows are still with advanced economies outside Asia. For reserve management, Bank Negara Malaysia has for a number of years invested in both USD and local currency denominated Asian bonds. It has been an enriching experience investing in these markets. The many years of experience in our neighbours’ financial markets has enabled us to have a hands-on understanding on the regulatory environments and nuances of the Asia local currency debt markets. For example, liquidity is a challenge in most markets, including the Malaysian, for some issuances. But it can be overcome if we look at the issue from a fresh perspective. Another area is the underdeveloped repo markets and hold-to-maturity behaviours of Asian investors that reduce liquidity, an important investment criteria for many investors. In addition, the non-uniform regulatory environment across regional markets pose significant resource and capacity challenges that prevent ASEAN fixed income market to function as a single large market. These shortcomings add to the complexities and cost in investing in the region, thus making it less attractive to potential investors. Collectively, there is much more that can be done. The capacity and capability of the domestic players need to be elevated and to enable them to efficiently facilitate regional investment by providing to would be investors up-to-date and comprehensive information and advice on credit, regulatory requirements and tax implication. Equally important, they should be able to effectively offer ancillary services such as FX and interest rate hedging and securities custody services.
And even what we know and can identify today, our perceptions may be obscured by our perceived understanding based on past world views. There is a fine line between the knowns and the unknowns. Navigating through these will require striking the right balance between having an open mindset to allow innovations to prosper while ensuring that key risks can be contained. For the “known territory,” essentially developments that we have begun to identify use cases, can control the risks, and believe that the benefits will outweigh the costs, we must continue to refine our understanding, expand our knowledge, and find ways to streamline them into our policymaking process. This is so that the perception or the extent of what we know becomes clearer. For instance, growing popularity of internet-of-things—from usage of smartphones to various data-transmitting devices—has created massive amount of individual-level and transaction-level data. These “big data” can help unlock our understanding of the behavioral patterns, perhaps, not even realized by individual data owners. At the Bank of Thailand, we have begun employing big data analysis in macroeconomic, banking sector, and financial market assessments to complement our policymaking process. This has helped ensure that our policy actions are evidence-based and timely. At the same time, necessary steps are taken to validate the integrity and quality of data used as well as to safeguard data privacy. We are just scratching the surface of the potential usage of big data and much more work will be done in this area in the years to come.