As part of its efforts to improve the liquidity and stability of the JGB market, the Japanese Ministry of Finance has confirmed it will introduce a primary dealer system in October 2004.
Primary dealers will compete in tenders of JGBs, and make markets in them. They will also be able to take part in non-competitive bids, subscribing to new issues at the average of the bid prices in the competitive bid. The authorities will also discuss pricing and timing of JGB issues with the primary dealers on a regular basis.” When-issued transactions” – a grey market – for JGBs is expected to be introduced around February 2004.
The introduction of the primary dealer system will coincide with the establishment of an advisory committee to obtain opinions from market pundits.
In the first half of next year, the Ministry of Finance will issue a report on the management of the national debt, which will include a statement of policy on greater disclosure and transparency in the process.
American Institutional Investors, released this month. The report-a joint venture between Cerulli Associates and its strategic partner in Latin America, Latin Asset Management-is the result of an analysis of the region’s US$320 billion managed funds marketplace, which Cerulli thinks is likely to nearly double in size by 2008.
Cerulli also believes cross-border fund vendors and global asset management firms will reap the benefits of this expansion, The change is led by the larger units of Latin America’s privatized pension systems-AFPs and Afores-but fuelled by a number of supplementary pension schemes emerging in several Latin American countries.
The report focuses heavily on Chile, where AFPs are taking advantage of higher caps on overseas investments, and new investors are starting to experiment with international portfolios.
Mexico, potentially an even larger marketplace, is also slowly opening to foreign investments. But many of the new rules remain tentative, and the study points out the challenges foreign managers are likely to encounter.
Cerulli also believes the local mutual fund industries in Chile and Mexico are poised to grow explosively, provided they get a push from the banks. Regulators have modernized local mutual fund industries and now let most mutual funds place 100% of their assets overseas. The consultancy argues that now banks, the chief fund distributors in the region, must look beyond their profitable spread business on the lending side and grow their fund assets and sales.