The Asian and Oceanian Stock Exchanges Federation (AOSEF) has called for greater cooperation among its members to maintain their competitiveness despite the ongoing economic crisis.

In a statement released over the weekend, the Philippine Stock Exchange (PSE) said AOSEF-member exchanges stressed the need to band together in order to be noticed as a "bigger asset class" amid the financial downturn.

Citing a study by the Stock Exchange of Thailand (SET), the PSE said each ASEAN bourse has a market capitalization of between $51.38 billion to $232 billion, which is hardly recognizable when compared to others in the World Federation of Exchanges (WFE).

The PSE, for one, only ranked 39th among WFE with $54.1 billion in market capital.

But if they pool together the five major bourses in the ASEAN region (Singapore, Malaysia, Indonesia, Thailand, and the Philippines), they would reflect a larger market capital of $643 billion.

This would place them on the 12th spot among WFE, which is currently led by bourses from the United States, Europe, Tokyo, and Hong Kong.

“Although other member exchanges identified certain challenges to setting up an ASEAN linkage such as issues on securing support from regulators as well as establishing liabilities for clearing and settlement, it is evident that many of them were interested in the plan to create a stronger and more visible ASEAN asset instrument at a time when global exchanges are consolidating," said PSE President and CEO Francis Lim.

"At the same time, AOSEF and ASEAN should work together to develop regional cooperation. AOSEF and ASEAN will not compete but will complement each other to enrich one another's activities. The role of the markets in the region is getting higher importance with the development of their respective economies,” he added.

For its part, the PSE said the Korea Exchange (KRX) called for a joint centralized clearing of credit derivatives among AOSEF members as most Asian exchanges are moving independently on the clearing and regulation of over-the-counter (OTC) products.

The Korea Exchange noted that credit default swaps have grown in value to $54.6 trillion as of June last year from $17.1 trillion in 2005. At present, the PSE said there are concerted efforts in Europe and the US to set up consistent standards to regulate OTC products, indicating the business opportunity that lies in these types of instruments despite the crisis.

Investors buy credit default swaps (CDS) to insure against defaults on corporate bonds. The contract involves a buyer paying a series of settlements to the seller in exchange of the right to a payoff if a credit instrument goes into default.

“AOSEF members noted that the global financial crisis was due to the failure to manage the risks attached to credit derivatives. The growing concern among them today is how to best manage the risk arising from OTC derivatives trading. They have also noted that global exchanges are now racing towards a joint clearing of OTC products and that there is slower progress among Asian markets. But the challenge remains for most Asian exchanges to develop more sophisticated products to offer alternatives to investors even when market conditions are weak,” Lim said.

KRX also noted the development of an Asian bond market as a united response to the financial crisis. Asian bonds have steadily expanded recently to US$11.3 trillion in 2007 from US$10 trillion in 2006, KRX noted.

To respond to the challenging business landscape, the PSE said the AOSEF is now creatinga roadmap to pursue common interests among its member exchanges.

Aside from the PSE, other members of the AOSEF include the Australian Securities Exchange, Bombay Stock Exchange Ltd., Ho Chi Minh Stock Exchange, Hong Kong Exchanges and Clearing Ltd., Indonesia Stock Exchange, Jasdaq Securities Exchange, Korea Exchange, Bursa Malaysia Berhad, Mongolian Stock Exchange, National Stock Exchange of India Ltd., New Zealand Exchange, Osaka Securities Exchange, Shanghai Stock Exchange, Shenzhen Stock Exchange, Singapore Exchange Ltd., Taiwan Stock Exchange, The Stock Exchange of Thailand, and Tokyo Stock Exchange.