Report on ASEAN Initiatives Presentation to 25th AOSEF General Assembly Taipei, Taiwan April 15, 2006

1 Korea Exchange* ASEAN – 5*** Euronext Hong Kong Exchange & Clearing Domestic Market Cap (Billion USD) * Includes KOSDAQ market data ** Approximately USD 1.4 million *** Included Bursa Malaysia, Jakarta Stock Exchange, Philippine Stock Exchange, Singapore Exchange and Stock Exchange of Thailand **** With domestic market capitalization of ~USD 798 billion Source: World Federation of Exchanges ASEAN CAPITAL MARKET ’ S PRESENCE IS LIMITED Value Traded (Billion USD) Turnover ratio (Percent) Value Traded (Billion USD) Equity market Bond market Introduction of ASEAN initiatives: As of December 31, 2005 Almost equivalent to Borsa Italiana**** in Europe

2 MAJOR OBSTACLES WERE IDENTIFIED Introduction of ASEAN initiatives: Regulations governing capital account mobility do not allow full capital market integration Standards (e.g., disclosure requirements, credit rating) are different among exchanges, leading to difficulties in comparing and benchmarking companies System and platform (e.g., trading platform, clearing system) are not compatible among exchanges Trading hours do not overlap – only one common trading hour * In GMT+6 time zone Source: World Federation of Exchanges; FTSE/ASEAN index series research report – September 2005 Common trading hours Trading hours Major obstacles

3 THEREFORE, VARIOUS ASEAN WORKING PROJECTS WERE ESTABLISHED … Vision: To develop and promote cooperation in the areas of finance for the benefit of Member States Objectives: Promote mutual understanding of each other's economic situation and policies so as to provide better cooperation in the area of economics and finance Strengthen their efforts in addressing the economic challenges facing them with a view to promoting stable and sustainable economic growth in each Member State and in the region ASEAN Finance Ministers Meeting (AFMM) ASEAN Capital Markets Forum (ACMF) Linkages Taskforce ASEAN 100 Taskforce Introduction of ASEAN initiatives: Objectives: Provide a high-level forum for ASEAN members to discuss capital market issues of common concern Actively involve in the initiatives discussed during the meeting which would be further communicated to ASEAN policy makers for strategic decision making in relation to capital market developments Vision: To develop an interlinked ASEAN securities market place by 2010 Efficient cross border market access for trading, clearing and settlement Standardization in market practices An attractive investment proposition to international investors Objectives: Brand ASEAN as an asset class Broaden exposure of ASEAN companies Facilitate investments into ASEAN companies Act as a benchmark for ASEAN performance Source:

4 … AND HAVE WORKED ON INITIATIVES THAT COULD BE GROUPED INTO 2 MAJOR STRATEGIC THRUSTS Strategic thrustDescription Foster alliances and linkages Develop models of alliances and linkages in both equity and bond market among ASEAN exchanges and explore with various domestic agencies to ensure that they are implementable Harmonize regional standards for –Disclosure requirements –Accounting and auditing standards –Comparability of credit rating –Distribution rules –Cross-recognition of qualifications on education and experience of capital market professionals within the region 1 Strengthen ASEAN ’ s profile as an asset class Launch asset-class “ ASEAN ” products in both equity and bond market, e.g., ASEAN indices Encourage private sector efforts to develop ASEAN-related financial products, e.g., ETFs on ASEAN indices, mutual funds based on Asian- issued bonds Enhance international interest as an attractive investment destination to the international investor community by arranging/participating in international events (e.g., roadshow in Europe, IMF/WB meetings) 2 Introduction of ASEAN initiatives: Source: Progress report on the roadmap for integration of ASEAN

5 FOSTER ALLIANCES AND LINKAGES 1 Status and next steps of the initiatives: Equity market Bond market What has been doneNext steps Identified a model of alliances and linkages among ASEAN exchanges in a form of regulatory request list to facilitate: –Trading of securities listed on exchanges –Clearing and settlement of exchange linkage trades –Dissemination of corporate info to all investors –Regulators to act on market misconducts Circulating the request list by exploring with domestic agencies to ensure its practicality Agreed to work on harmonizing regional standards, e.g., disclosure, accounting&auditing standards Commenced the study on Southeast Asian Equity markets via a Regional Technical Assistance program* with support from ADB** Implement the regulatory request list by 2010 Continue the work to harmonize regional standards Set up “ Regional Bond Market Linkages ” working group Completed preliminary market consultation to indicate models of linkages in accelerating bond market development Further study and develop a proposed model of linkages Develop an E-Bond Trading Platform to be used among ASEAN exchanges Market * To identify key areas of co-operation and to put a report outlining the impediments with practical recommendations ** Undertaken by ADB-appointed consultants from February to December 2006 Source: Progress report on the roadmap for integration of ASEAN

6 STRENGTHEN ASEAN ’ S PROFILE AS AN ASSET CLASS Equity market Bond market What has been doneNext steps Launched 2 ASEAN indices as follows: –FTSE ASEAN 180 as a benchmarking index –FTSE ASEAN 40 as a tradable index* Agreed to jointly develop an ETF** on FTSE ASEAN 40 to attract investors who wish to hold a portfolio of ASEAN equities Participated in international events (e.g., roadshows, IMF/WB meetings) to enhance international interest in ASEAN Launch an ETF on FTSE ASEAN 40 Encourage private sector efforts to develop ASEAN-related financial products Developed description of required supporting environment to facilitate the cross-border distribution of mutual funds based on Asian-issued bonds Develop the guidelines and action plan to finally possess the required supporting environment * Suitable for institutional and retail funds, exchange-traded funds and derivatives contracts ** Exchange-traded fund Source: Progress report on the roadmap for integration of ASEAN 2 Status and next steps of the initiatives: Market

7 FTSE/ASEAN INDICES WERE SUCCESSFULLY LAUNCHED IN 2005 Status and next steps of the initiatives: FTSE/ASEAN Indices  Created from all eligible stocks within the FTSE All-World Universe FTSE/ASEAN Index (Benchmark)  Provides an indication of the financial performance of the largest companies within the region  Consists of 180 constituents from the five countries represented: Indonesia, Philippines, Singapore, Malaysia and Thailand FTSE/ASEAN 40 Index (Tradable)  Designed to support the launch of financial derivative products to give exposure to the five major markets of South East Asia  Top 40 constituents from the FTSE/ASEAN Index by market capitalization form the tradable index No of stocks by country Singapore Thailand Indonesia Malaysia 100% = ~USD 146 thousand Philippines Country weightings (% of investable market cap) Information of FTSE/ASEAN 40 As of April 6, 2006 Unit: Percent Indonesia Malaysia Philippines Singapore Thailand Source:

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