Asia's model domestic bond market?

The Hong Kong dollar bond market has stood tall amid the carnage in Asian financial markets of the last few months. Despite a dramatic spike in short term interest rates as the territory's authorities battled (successfully) to defend the currency peg, new issuance has remained buoyant - with issuers attracted by the deep arbitrage opportunities and an increasingly broad range of investors drawn by the high returns on offer. To be sure, the Hong Kong debt market still has a long way to go if it is become a more consistent - and less fleeting - feature of the international capital markets. New issuers and investors are required, not least from China; a deeper commitment to market-making and liquidity is needed; and the range of market participants must broaden. But the market is starting to become more international in its reach. And, at a time when the development of Asian bond markets as an alternative to bank lending has never been more important, other Asian countries could do a lot worse than use Hong Kong's efficient and well run market as a model. Jackie Horne reports.