This chapter provides an overview of capital market developments in Asia, covering trends in public and private equity, corporate debt and sovereign bond markets. It examines how tighter financial conditions, heightened trade policy uncertainty and geopolitical tensions have influenced corporate financing in 2025 and early 2026. It also explores the impact of trade-related uncertainties on capital markets, including effects on volatility, capital flows and financing patterns across the region. Drawing on the analysis, it identifies key policy considerations aimed at strengthening market resilience and supporting the continued development of capital markets in the region.
Asia Capital Markets Report 2026
Abstract
Asian capital markets were impacted in 2025 and early 2026 by renewed tariff uncertainty and rising geopolitical tensions related to the conflict in the Middle East. Asia’s integration into global production networks, trade flows and maritime transport routes increases the region’s exposure to external shocks and changing financial conditions.
Equity market volatility increased sharply following tariff announcements in April 2025 and geopolitical tensions in early 2026, while bond spreads widened during periods of market stress, particularly in high-yield segments. Portfolio flows reflected a broad reassessment of risks, with equity outflows in early 2025 and stronger inflows into debt markets.
Asia represented around 31% of global GDP in 2025 and accounted for 29% of global public equity market capitalisation, 56% of listed companies and 52% of global venture capital activity. However, the region’s share across debt market segments is significantly underrepresented compared to its economic weight in global GDP, particularly in private credit and syndicated lending markets.
Capital raising conditions remained uneven across Asian markets during 2025. Initial public offering activity remained subdued across much of the region compared to 2022-2024 averages, while firms relied more heavily on secondary equity offerings and corporate bond issuance. Despite heightened uncertainty, delisting activity of Asian companies from US markets remained broadly stable in 2025.
Capital raising patterns also differed between tradable and domestic-oriented sectors. In Asia, IPO activity weakened more sharply in domestic-oriented sectors, while tradable sectors remained comparatively more resilient and accounted for a larger share of corporate bond issuance than globally, potentially reflecting stronger investor confidence in export-oriented and technology-related sectors, expectations related to supply-chain diversification and continued market access for export-oriented firms.
Sovereign bond markets remained resilient overall, supported by strong reliance on local currency and fixed-rate financing as well as relatively long maturities, which helped limit exchange-rate and refinancing vulnerabilities despite elevated issuance and debt levels.
Corporate debt markets also remained broadly resilient despite heightened uncertainty, supported by corporate bond issuance, while syndicated lending declined and private credit activity remained limited. Access to corporate bond market remained broadly available, including for smaller firms in several economies, although issuers increasingly opted for shorter maturities, heightening their exposure to future refinancing pressures.
Geopolitical tensions and energy supply disruptions increased inflationary pressures across parts of Asia, potentially constraining the scope for further monetary easing. Any renewed increase in interest rates could heighten refinancing risks given the substantial share of outstanding corporate debt due for refinancing over the next three years.
Private equity and venture capital markets remain under pressure, with fundraising declining for a fourth consecutive year, although assets under management continued to grow, supported by higher valuations. At the same time, deal value in exit activity shifted towards traditional channels, from secondary buyouts and back towards trade sales.
Asian capital markets were affected by two major developments in 2025 and the first half of 2026: the renewed escalation of tariff-related uncertainty from April 2025 onwards and rising geopolitical tensions associated with the conflict in the Middle East in 2026. Asian economies remain particularly sensitive to these developments given their integration into global production networks, openness to international trade and dependence on energy from the Middle East. Moreover, Asia is the largest buyer of oil and gas transiting through the Strait of Hormuz, accounting for roughly 80% of liquefied natural gas shipments via this route.
Sensitivity to trade policy uncertainty is especially significant given Asia’s strong economic linkages with the United States, which accounted for around 15% of the region’s total exports and approximately 4% of aggregate GDP in 2024, while Asia represented around 36% of total US imports.
However, exposure to trade-related uncertainty varies considerably across Asian economies depending on their export structure and reliance on the US market. Smaller export-oriented economies, such as Cambodia and Viet Nam, show particularly high reliance on the US market, both as a share of total exports and relative to their GDP (Figure 1.1, Panel A and B). Malaysia, Singapore, Chinese Taipei and Thailand also display particularly high exposure relative to the size of their economies. By contrast, larger and more diversified economies such as China and Indonesia are less dependent on the US market despite their substantial trade volumes.
The impact of trade-related uncertainty is also shaped by differences in effective tariff rates applied by the United States across Asian economies. China and India face relatively high effective tariff rates, while several Southeast Asian economies continue to face lower tariff levels.
Differences in trade exposure and tariff rates contributed to shifts in regional trade patterns across Asian economies
Note: In Panel A, information on total exports is based on data from the OECD Balanced International Merchandise Trade dataset for 2024
Source: BEA (2025[1]) International Trade and Investment Country Facts, https://apps.bea.gov/international/factsheet/index.html;IMF (2026[2]), World Economic Outlook Data – GDP, https://www.imf.org/en/publications/weo/issues/2026/01/19/world-economic-outlook-update-january-2026; OECD (2026[3]), The OECD Balanced International Merchandise Trade Statistics, https://doi.org/10.1787/07518168-en.
By the end of 2025, easing uncertainty supported market sentiment. However, differences in trade exposure and tariff rates had already contributed to shifts in regional trade patterns. Production and trade flows increasingly moved towards alternative locations in Asia in line with “China+1” dynamics, referring to the diversification of production and supply chains away from China towards other Asian economies. At the same time, part of these developments may also reflect shorter-term trade adjustments, including export rerouting through lower-tariff economies and the frontloading of shipments ahead of tariff implementation. As a result, while Asia’s overall export exposure to the US market remained broadly stable between 2024 and 2025, declining by just 0.4%, export exposure increased in Viet Nam, Cambodia, Lao People’s Democratic Republic, Chinese Taipei and Thailand, while it declined in India, China, Korea, Japan, Hong Kong (China), Philippines and Singapore (Figure 1.1, Panel C).
Beyond their broader economic effects, tariff-related uncertainty and geopolitical tensions can affect capital markets by increasing risk aversion, weakening investor confidence and disrupting trade and investment flows. In equity markets, these developments may be reflected in lower valuations, weaker capital raising activity and reduced private equity and venture capital activity due to higher risk premium, weaker exit conditions and lower transaction volumes. In debt markets, weaker credit fundamentals may contribute to wider bond spreads, higher borrowing costs and rising default risks. More broadly, trade policy uncertainty can dampen growth by delaying investment and consumption until policy clarity improves, while slower growth may weaken sovereign fiscal positions (Kohlscheen et al., 2025[4]).
Heightened trade policy uncertainty and weaker growth expectations were also reflected in corporate investment decisions across the region. In 2025, the median listed company in the region reduced investment by 7% compared with the previous year, while firms at the lower end of the distribution experienced substantially larger declines (Figure 1.2, Panel A).
Corporate investment weakened across Asia in 2025, with larger declines among smaller firms
Note: The figure covers the 10 000 largest listed companies in Asia by market capitalisation. Companies without 2024 investment data are excluded. Panel A shows the percentage change in nominal investment by percentile between 2024 and 2025.
Source: OECD Capital Market Series dataset; see Annex A for details
Consistent with this pattern, 44% of listed companies in Asia reduce their investment by more than 10% in 2025 compared to 2024 (Figure 1.2, Panel B). These findings suggest that uncertainty weighed on investment decisions across a broad range of firms, with the strongest effects concentrated among smaller companies already facing weaker investment dynamics.
Deep and diversified capital markets have become particularly important to overcome the effect of tariff‑related uncertainty, geopolitical tensions and fuel restrictions imposed on governments, central banks and corporations. Deep and diversified public and private capital markets can help firms maintain access to financing, support investment and refinancing activity, and facilitate risk sharing across the economy, ultimately increasing resilience. Similarly, well developed financial markets can support governments in raising financing and central banks to better maintain price stability. By contrast, economies with shallower or less diversified markets may be more vulnerable to capital outflows, weaker liquidity and tighter financing conditions.
Asian capital markets are increasingly integrated into global financial markets. Accounting for around 31% of global GDP in 2025, Asia hosts 56% of the total number of listed companies. The region’s shares across market segments vary considerably, reflecting differences in the development of financing channels across economies (Figure 1.4). The region accounts for 29% of global public equity market capitalisation, highlighting the importance of Asian public equity markets in global financial ecosystem. Asia also represents 52% of global venture capital activity and 20% of private equity markets, pointing to the growing role of private market financing, particularly for innovative and high-growth firms.
By contrast, Asia’s presence in debt market segments is more uneven. While the region accounts for 30% of global corporate bond markets, its share in syndicated lending and private credit remains comparatively limited at 15% and 4%, respectively, suggesting that alternative credit channels remain less developed in many economies. In sovereign bond markets, Asia represents around 25% of global outstanding government bonds, below its share of global GDP.
Asia’s share in global capital market segments does not always align with its economic weight
Note: Private credit share is calculated using total assets under management (AUM), defined as the aggregate AUM of private credit funds with Asia as their primary investment focus, and the data is as of September 2025. Sovereign bonds include bills.
Source: OECD Capital Market Series dataset; Preqin; 2025 OECD Survey on Central Government Marketable Debt and Borrowing; LSEG; see Annex A for details.
Capital market development differs significantly across Asian economies, shaping their capacity to absorb external shocks and support corporate financing during periods of stress (Figure 1.4). Public equity markets in Hong Kong (China) and Chinese Taipei stand out for their exceptionally high market capitalisation relative to GDP, deep liquidity and strong trading activity. Korea and Japan also combine relatively large equity markets with high turnover ratios, reflecting active domestic and international investor participation. By contrast, several smaller and lower-income economies, including Cambodia, Lao PDR and Mongolia, continue to exhibit comparatively shallow equity markets characterised by limited market capitalisation, fewer listed companies and low trading activity.
Public equity markets across Asia exhibit significant variation in size and depth
Note: Turnover ratio is calculated as total traded value over market capitalisation at the end of 2025. The bubble size is proportional to the turnover ratio in each market. For example, Hong Kong (China)’s turnover ratio is 130%, and Viet Nam’s ratio is 96%. For Sri Lanka, 2024 GDP data are used.
Source: OECD Capital Market Series dataset; LSEG; annual/quarterly/monthly reports of respective stock exchanges; see Annex A for details.
Corporate bond market development also varies significantly across the region. In absolute terms, China, Japan and Korea account for the majority of outstanding non-financial corporate bond issuance, reflecting the scale and maturity of their domestic debt markets. Relative to GDP, however, Hong Kong (China) hosts the region’s largest corporate bond market, followed by Thailand and Korea (Table 1.1). Thailand, in particular, has experienced rapid market expansion following reforms introduced after the Asian Financial Crisis to reduce reliance on foreign currency borrowing and strengthen local currency debt markets.
Corporate bond market depth and development differ considerably across Asian economies
Note: For Sri Lanka, 2024 GDP data are used.
Source: OECD Capital Market Series dataset; LSEG; see Annex A for details.
While Asia accounts for around 15% of global outstanding non-financial corporate bonds, market size differs considerably across economies. In Hong Kong (China), Thailand and Korea, outstanding non-financial corporate bonds exceed 15% of GDP, whereas in economies such as Indonesia, India, Malaysia and Viet Nam they remain below 5% of GDP. In Cambodia, Pakistan and Bangladesh, outstanding non-financial corporate bonds account for close to zero percent of GDP, highlighting the near absence of corporate bond market financing in these economies.
1.1.1. Market volatility, capital flow dynamics and equity valuations
Trade policy uncertainty and geopolitical tensions had a visible impact on Asian financial markets in 2025 and the first half of 2026. Global trade policy uncertainty reached its highest recorded level in 2025 contributing to periods of heightened market volatility, portfolio reallocations and shifts in equity valuations across the region, while also leading to wider bond spreads and tighter financing conditions (Figure 1.5, Panel A).
Equity markets recorded overall gains in 2025, although performance was significantly affected by trade-related uncertainties in early 2025 (Panel B). By the end of March 2026, however, equity markets in several economies, including India, were trading below their levels at the beginning of 2025, reflecting renewed uncertainty and weaker investor sentiment over the conflict in the Middle East and its impact on Asian economies.
At the same time, aggregate government and corporate bond spreads widened during periods of market stress, signalling tighter financing conditions and increased risk aversion among investors (Panel C). Both high-yield and investment-grade segments were affected, with the widening more pronounced in the high-yield segment, particularly during tariff-related announcements. Spreads widened again in early 2026 amid geopolitical tensions and disruptions linked to the conflict in the Middle East, although the increase remained more moderate than the peaks observed during the tariff-related uncertainty of 2025.
Heightened trade policy uncertainty and geopolitical tensions led to market volatility and repricing
Note: Indices in Panel B are the TOPIX Stock Price Index of the Tokyo Stock Exchange for Japan, the Shanghai Stock Exchange Composite Index for China, and the BSE Sensex Index of the Bombay Stock Exchange for India. Spreads in Panel C come from the Bloomberg Asia USD Investment Grade Bond Index and the Bloomberg Asia USD High Yield Diversified Credit Index. The Bloomberg Asia USD Investment Grade Bond Index includes fixed-rate USD-denominated government-related and corporate investment grade debt of the Asia excluding Japan region. The Bloomberg Asia USD High Yield Diversified Credit index includes USD‑denominated high-yield bonds issued by Asian governments and Asian-domiciled corporations.
Source: Caldara et al, (2020[5]), Trade Policy Uncertainty Index, https://doi.org/10.1016/j.jmoneco.2019.11.002; LSEG; Bloomberg.
Market stress was also reflected in significantly higher volatility across both sovereign bond and equity markets. The volatility of Asian 10-year government bond yields and equity market indices exhibited two distinct spikes, coinciding with US tariff announcements in April 2025 and the escalation of the conflict in the Middle East in March and April 2026. Following the US tariff measures announcements, the largest increases were observed in export-oriented economies with strong manufacturing sectors and high trade exposure to the United States. Meanwhile, the volatility spike in 2026 was more pronounced in economies highly dependent on imported energy from the Middle East.
Sovereign bond markets reflected changing risk perceptions during periods of heightened uncertainty
Note: Monthly annualised volatility is calculated from daily yield changes and expressed in percentage points. Columns are ordered ascendingly based on April 2026 values. The latest observation refers to 17 April 2026. Data is unavailable for Bangladesh, Cambodia, Lao PDR and Mongolia. ISO country codes are shown. Each jurisdiction is colour-coded using conditional formatting based on its own values over the period shown. Darker red indicates the highest value and darker blue the lowest value recorded for that jurisdiction over the period shown.
Source: LSEG; Bloomberg; OECD Calculations.
Alongside higher volatility, equity markets became more synchronised during the period of heightened trade policy uncertainty, as reflected in rising cross-market correlations and increased common exposures across regional markets. Across the 18 Asian equity markets analysed, the distribution of pairwise return correlations shifted upward in April-May 2025, with the median rising from around 11% in July 2024-March 2025 to approximately 40%, and the upper tail approaching 90% (Figure 1.7). Correlations declined again between June 2025 and February 2026, before increasing once more during the geopolitical tensions of March-April 2026, when the median correlation rose to around 26%. This suggests that the tariff-related shock generated a stronger synchronised regional market response than the later geopolitical tensions related to the conflict in the Middle East.
Although correlations moderated after the initial tariff-related shock, some bilateral relationships remained durably elevated. For China, correlations with Japan, Korea, Thailand, Indonesia, Chinese Taipei, Hong Kong (China) and Singapore increased on average to more than three times their pre-escalation levels, while for Hong Kong (China), correlations with Korea, Singapore and Chinese Taipei more than doubled.
The persistence of these elevated correlations following the initial tariff-related shock likely reflects the greater importance investors attached to shared regional exposures, particularly in integrated technology and electronics supply chains linked to China. As markets increasingly responded to common trade and geopolitical risks, equity price movements across economies with similar export structures and supply-chain linkages became more synchronised. Higher correlations involving Hong Kong (China) and Singapore may also reflect their roles as regional financial hubs through which regional and global investor sentiment is transmitted across markets.
Regional equity market co-movement intensified during the escalation of US tariff measures from April 2025 onwards and rising geopolitical tensions
Note: Correlations are calculated as Pearson coefficients using daily natural logarithmic returns of the equity indices for 18 Asian jurisdictions.
Source: LSEG.
Shifts in investor sentiment and risk perceptions were also reflected in portfolio flows across the region during 2025. In equity markets, most economies experienced net foreign capital withdrawals between January and April, particularly Korea, India, Japan and China, pointing to increased risk aversion among foreign investors (Figure 1.8, Panel A). From May onwards, flow dynamics started to be different at the market level. Outflows persisted in some markets, including India and China, while Korea, Japan and the Philippines recorded a recovery in inflows, possibly reflecting improved investor sentiment towards economies benefiting from supply-chain diversification and relatively stronger market conditions. In the final months of 2025, equity inflows strengthened in some large markets, notably Japan and China, while several other economies, including India and Viet Nam, continued to record net withdrawals.
In contrast to developments in equity markets, Asian sovereign and corporate debt markets attracted substantial foreign capital inflows in 2025 (Figure 1.8, Panel B). This partly reflects a rotation away from USD-denominated assets and stronger demand for Asian fixed-income markets (ADB, 2025[6]). In addition, the structure of sovereign bond markets may also have supported resilience during periods of volatility. In Japan, a significant share of government debt is held by the domestic central bank, while China’s sovereign bond market is dominated by domestic commercial banks. In many other Asian economies, domestic pension funds and insurance companies also play an important role in government bond markets, potentially helping absorb shocks and reduce the sensitivity of sovereign debt markets to changing foreign investor sentiment.
Between January and April 2025, every economy in the region recorded net inflows, with Japan and China receiving the largest volumes, reflecting the depth and size of their sovereign and corporate bond markets. From May onwards, inflows weakened across most economies, with flows to China and Thailand turning negative, while Indonesia, Korea and the Philippines continued to attract inflows. In the final months of 2025, China continued to register net outflows, whereas Korea experienced a further acceleration in inflows, likely reflecting its central role in global technology supply chains. Strong inflows into Japanese debt markets also coincided with the relative tightening of Japanese monetary policy.
Portfolio flows in 2025 reflected divergent investor behaviour across Asian equity and debt markets
Note: Debt flows include both flows to corporate bonds and sovereign bonds. Negative values indicate net capital withdrawals, while positive values reflect capital allocation.
Source: OECD Monthly Capital Flow Dataset; De Crescenzio and Lepers, (2025[7]), Extreme capital flow episodes from the Global Financial Crisis to COVID-19: An exploration with monthly data, https://doi.org/10.1787/d557b9c4-en.
Changing investor sentiment, portfolio reallocations and evolving expectations regarding trade exposure were also reflected in equity valuation dynamics across Asian markets. Following the tariff announcements in 2025, equity valuations declined across several Asian markets. Companies most exposed to tariff changes (tradable sectors1) and domestic-oriented companies largely moved in the same direction, suggesting a broad-based response to heightened trade uncertainty (Figure 1.9). Around April, valuation declines were observed in economies such as Hong Kong (China), Malaysia and Viet Nam, with tariff-exposed firms experiencing more pronounced losses than domestically oriented peers.
After April, valuation dynamics began to diverge across markets. In China, Indonesia, Singapore, Chinese Taipei and Thailand, tradable sectors recovered more strongly and ended the period with higher valuations than domestic-oriented firms. In Korea, tariff-exposed firms also recorded a marked increase towards the end of the period, outperforming domestic firms. By contrast, Japan remained relatively resilient throughout the year, with both groups showing steady and moderate increases, while in Viet Nam, domestic-oriented firms recorded stronger cumulative gains. Towards the end of 2025, however, valuation paths began to converge again in several markets, suggesting that the initial impact of the tariff shock had partially dissipated.
Tariff-exposed firms saw valuation declines after the April 2025 announcement, followed by a rebound
Note: The index shown in the figures is calculated using monthly changes in the market-capitalisation weighted average price-to-book (P/B) ratio in each market. Data labels show the lowest point of the index for tariff-exposed firms for each jurisdiction. Tariff-exposed firms are defined using the Reference data Business Classification (TRBC) Industry Description activity-level codes and include goods-producing industries with significant exposure to international trade, which are more likely to be affected by tariff announcements. This classification is a simplified proxy for tariff exposure, as not all firms in these sectors are exporters, and indirect effects may also affect firms in other sectors. Observations of P/B with missing or non-positive ratios are excluded. Financial companies are excluded from the analysis. P/B ratios are winsorised at the 1%.
Source: LSEG.
Overall, the patterns point to increasing differentiation across Asian markets based on expected exposure to trade reconfiguration and supply-chain shifts. As mentioned above, while Asia’s overall export exposure to the United States remained broadly stable between 2024 and 2025, trade flows increasingly shifted within the region towards alternative production locations. This is consistent with “China+1” dynamics, whereby companies diversify production and source away from China towards other Asian economies to reduce tariff exposure and supply-chain risks. Equity valuation developments suggest that investors increasingly differentiated between economies expected to benefit from these shifts and those considered more vulnerable to tariffs and weaker external demand.
1.1.2. Capital raised from public markets
Despite heightened trade policy uncertainty and geopolitical tensions, Asian capital markets continued to provide financing to both sovereigns and corporates in 2025. However, corporate financing patterns shifted across market segments, with firms relying more heavily on secondary equity offerings and corporate bonds. At the same time, sovereign borrowing remained elevated across the region amid growing financing needs and tighter global financial conditions.
In 2025, Asian sovereign bond issuance reached a record high of around USD 4.1 trillion, representing an annual increase of 7% in real terms. More broadly, issuance has remained relatively stable at around USD 4 trillion annually since 2022 (Figure 1.10, Panel A). Despite this, Asia’s share of global issuance declined to one-fifth in 2025, down from around one-quarter in 2022, reflecting higher issuance growth in the rest of the world.
At the same time, the aggregate outstanding amount of Asian sovereign marketable debt reached a record high of around USD 18.3 trillion (Panel B). Japan had the highest outstanding amount in the region, accounting for about 42% of the total in 2025. This largely reflects the marked depreciation of the Japanese yen against the US dollar. Measured in domestic currency, the stock of debt steadily grew in almost all Asian jurisdictions. While the marketable sovereign debt-to-GDP ratio decreased in Japan due to elevated nominal GDP growth, it increased from 20% to 30% in China from 2022 to 2025 and remained broadly stable at about 35% for Asia excluding Japan and China.
Asian sovereign debt markets continued to expand in 2025, with record levels of issuance and outstanding debt
Note: Sovereign bond issuance and outstanding include bills.
Source: 2025 OECD Survey on Central Government Marketable Debt and Borrowing; LSEG; see Annex A for details.
In public equity markets, already listed Asian companies tapped the markets to raise fresh capital in 2025 amid heightened market uncertainty. Fewer companies compared to the last three-year average joined public equity markets in the region. Initial public offerings (IPOs) contracted compared to the last three-year average (Figure 1.11, panels A and B). In total, companies raised approximately USD 76 billion through IPOs, compared to an average of USD 85 billion over the previous three years. By contrast, secondary equity offerings (SEOs) reached around USD 274 billion, above the average of USD 177 billion, with financial companies accounting for around 40% of total issuance.
Asian listed corporations continued relying on secondary equity offerings and corporate bonds, while the number of IPOs declined
Source: OECD Capital Market Series dataset; LSEG; see Annex A for details.
In terms of number, IPO activity in Asia regionally declined slightly from the average of the previous three years, from 882 to 854 in 2025, with fewer large transactions. In contrast, secondary equity offering activity strengthened, with the number of offerings increasing from 1 463 to 1 605. Despite the shifts in capital raising patterns and heightened trade-related uncertainty, delisting activity remained broadly stable in 2025. A total of eight Asian‑headquartered companies delisted from the US market, compared with six in 2024 and seven in 2023.
At the same time, corporate bond issuance in Asia reached a new peak of USD 2.77 trillion in 2025, representing a 20% increase in real terms compared with the average annual issuance over the previous three years. This surpassed the previous record of USD 2.71 trillion set in 2021 (Figure 1.11, Panel C). Outstanding corporate bonds grew at their fastest pace since 2021, rising by 3% to USD 10.8 trillion by the end of 2025. While financial companies account for 58% of outstanding corporate bonds, the strong growth recorded in 2025 was primarily due to a 2% rise in outstanding amounts by non-financial corporations. This marked a shift following three consecutive years of contraction in the segment (Figure 1.11, Panel D).
Across most jurisdictions, companies relied more heavily on secondary equity offerings and debt financing amid heightened uncertainty, in line with the regional trend. At the same time, equity offerings and corporate bond issuance activity remained dominated by a small number of large markets (Figure 1.12).
China continued to account for the largest share of capital raised in the region in 2025. Japan, Hong Kong (China) and India were the most active markets in 2025. Compared to the 2022-2024 averages, initial and secondary equity offerings, and corporate bond issuance were higher. Singapore and China experienced increases in IPO activity and corporate bond issuance relative to their historical averages. Meanwhile, Korea and China saw a contraction in IPO activity, alongside increases in secondary equity offerings and corporate bond issuance compared to historical averages. In the Philippines companies raised more equity capital compared to their trend and in Viet Nam market-based financing recorded an increase only in secondary equity offerings.
Issuance activity reflects diverging market development levels across the region
Note: Bangladesh, Mongolia and Lao PDR are excluded from the figure.
Source: OECD Capital Market Series dataset; LSEG; see Annex A for details.
The amount of capital raised from Asian capital markets in 2025 expanded less than globally. The exception was a relatively higher issuance of corporate bonds by the tradable sector in Asia. In Asia, IPO activity contracted sharply in domestic-oriented sectors, while tradable sectors remained resilient (Figure 1.13). These companies probably raised capital before conditions worsened, aiming to build cash buffers. While at the same time, many of these companies may need to reorganise supply chains and production.
The amount of capital raised from Asian capital markets in 2025 expanded less than globally, except corporate bond issuance by the tradable sectors in Asia
Note: Change refers to the percentage change compared to the previous 3-year average.
Source: OECD Capital Market Series dataset; LSEG; see Annex A for details.
Monthly distribution of issuance activity indicates that firms adjusted their financing strategies in response to changing market conditions. IPO activity remained subdued until around September 2025 in both domestically oriented companies and those most exposed to tariff changes (tradable sectors), pointing to cautious conditions for new listings (Figure 1.14, Panel A).
At the same time, SEO activity was significantly lower during the first three months of the year before strengthening from the second quarter onwards (Panel B). Stronger SEO activity later in the year suggests that already listed firms largely retained access to market-based financing despite heightened uncertainty.
The relatively stable level of corporate bond issuance throughout the year further highlights the role of debt markets as an important source of funding during periods of elevated uncertainty. Stable issuance was observed in both sector groups, generally fluctuating around historical averages (Panel C). Issuance in tradable sectors increased notably in May and June. Overall, the relatively stable level of corporate bond issuance further highlights the importance of debt markets as a source of funding during periods of market stress.
Market-level information reveals substantial differences in how firms across Asia accessed market-based financing in 2025. In Japan, Chinese Taipei and India, companies in tradable sectors raised more capital than historical averages across all three market segments, IPOs, SEOs and corporate bonds, pointing to broad-based access to public markets despite heightened trade uncertainty. Relatively stronger financing activity in tradable sectors compared to domestic-oriented sectors was observed in six of the 12 jurisdictions for IPOs, five for SEOs and six for corporate bonds.
Asian non-financial companies relied on SEOs and corporate bond for financing
Note: Tradable sectors are defined using Refinitiv Business Classification (TRBC) activity-level codes and include goods-producing industries with significant exposure to international trade, which are more likely to be affected by tariff announcements. All sectors exclude financial companies.
Source: OECD Capital Market Series Dataset; see Annex A for details.
1.1.3. Capital raised from private markets and the use of syndicated lending
Non-traditional market segments, including private equity, venture capital, syndicated loans and private credit, play an increasingly important role in corporate financing across Asia. These markets can complement public markets by providing alternative sources of capital, particularly for early-stage, high-growth and/or non-listed companies. They can also support financing during periods of market stress by broadening the range of available funding channels and investor bases, and by providing quick access to much needed funds.
Private equity and venture capital
Private equity and venture capital play a key role in Asia by supporting the existing large number of growth-oriented companies and entrepreneurial firms across a wide range of sectors. Venture capital supports early-stage, high-growth and non-listed companies through long-term capital provision. At the same time, venture capital and private equity funds provide an important pipeline of firms for the public market while also benefiting from its function as an exit channel, highlighting the close interlinkages between public and private markets.
The development of private equity markets differs considerably across Asian economies. Activity remains concentrated on a limited number of larger markets, reflecting differences in market depth, investor bases and financing ecosystems across the region. Fundraising focus on China, Japan, India and Korea represented more than 80% of the total over the past two years.
Fundraising in Asian private equity (PE) and venture capital (VC) markets remained subdued in 2025. This is the fourth consecutive year of decreasing amounts raised by Asia-focused funds. In total, USD 69 billion was raised in 2025. Amounts raised by PE funds decreased by 41% and those by VC funds by 49%, relative to 2024 (Figure 1.15, Panel A). Consequently, the share of fundraising by Asian PE and VC funds fell to only 9% of the global total in 2025, the lowest since 2010.
Local investors have been constituting an increasing share of fundraising since 2023, but there are large differences across jurisdictions. Asian limited partners represented 96% of committed capital in H1 2025, above both 2024 (90%) and 2023 (94%). In 2025 overall, domestic investors in China and Japan contributed over 90% of committed capital, in India and Korea 50-60% and in Southeast Asia closer to 25% (HSFK [from Pitchbook], 2026[8]; HSFK [from Pitchbook], 2025[9]).
Despite weak fundraising, assets under management (AUM) continued to expand and remained broadly stable relative to global markets (Panel B). Lower fundraising and continued capital deployment reduced dry powder levels, although undeployed capital remained elevated at USD 528 billion. Meanwhile, new investments and higher valuations have boosted the unrealised value of investments, crossing the USD 3 trillion threshold. As a consequence, Asia’s share of assets under management has remained stable at 29% of the global total despite the drop in fundraising.
Fundraising and investment activity remained subdued in 2025, while assets under management continued to grow
Source: OECD Capital Market Series dataset; Preqin; see Annex A for details.
Investment activity in private and venture capital markets contracted sharply in the second quarter of 2025 following the escalation of tariff measures. While the threat of global tariffs dampened deal-making globally, Asia was particularly affected given the importance of the United States as both a trading partner and the final consumer market for many Asia-originated goods. Total private equity deal value in Asia declined by 48% between the first and second quarter, compared to declines of 27% in the United States and 16% in Europe. The contraction was particularly pronounced in Japan, while China also recorded a marked decline. In India the adjustment occurred with some delay, with deal values weakening more visibly in the third quarter.
Private equity and venture capital markets rebounded relatively quickly later in the year, as temporary trade settlements and easing uncertainty supported market sentiment. Despite volatility during the year, the sentiment among fund managers in several large Asian markets remained comparatively positive. In Japan, one-third of surveyed managers described 2025 as “much better than last year”, compared with 13% across the region overall. Similarly, in China, 87% of respondents indicated that market conditions were at least somewhat better than in the previous year (Bain & Co, 2026[10]).
Overall, investment activity remained subdued in 2025 (Figure 1.15, Panel C). While China recorded a modest recovery and Japan experienced relatively strong growth, deal activity in many other Asian markets continued to contract amid weaker economic conditions, higher valuations in some markets and higher financing costs, weighing on the prospects of returning to the deal activity of the late 2010s and early 2020s.
Exit transactions experienced a small uptick in deal value relative to 2024, primarily driven by a strong IPO market, but remained below the 2022-2024 average (Figure 1.15, Panel D). The recovery can to a large extent be explained by activity in China, where IPO value roughly doubled from 2024. Overall, IPOs constituted 55% of exit deal value in 2025. Trade sales increased from the previous year, whereas secondary buyouts were at their lowest value in the past five years. This could indicate that the industry is returning to its traditional exit channels, rather than relying on extending holding periods and selling stakes to other PE firms.
Private credit and syndicated lending
Beyond private equity and venture capital markets, private credit and syndicated lending are other alternative financing channels of corporations. These segments may become particularly important during periods of tighter financial conditions, especially for firms seeking more flexible or tailored financing arrangements. However, compared with public corporate bond markets, both syndicated lending and private credit markets remain relatively underdeveloped across much of Asia. In 2025, syndicated lending contracted and private credit activity remained limited.
The Asian private credit market’s total assets under management stood at USD 77 billion as of June 2025 (Figure 1.16, Panel A). The market experienced a steeper real term contraction of 4% compared to the last three-year average, double the global decline of 2%. Consistent with global patterns, the share of undeployed committed capital (“dry powder”) to total assets under management fell to 23% – the lowest level in 15 years – continuing a downward trend from 43% in 2018 (OECD, 2026[11]). This suggests a shift away from rapid capital raising towards the deployment of capital into actual investment.
Syndicated lending contracted and private credit activity remained limited
Note: In panel A, 2025 values are as of September 2025.
Source: OECD Capital Market Series dataset; Preqin; see Annex A for details.
The low level of development of the private credit market is also evidenced by the limited and volatile investment in the region. In 2025, private credit transactions in Asia amounted to USD 7.5 billion, marking a 74% real increase compared to 2024, but still accounting for less than half of its 2019 peak level (Figure 1.16, Panel B). Like in corporate bond markets, activity is highly concentrated in a few jurisdictions: Korea, China, Japan and India, which together accounted for 91% of total private credit lending in the region between 2010 and 2025. Private credit activity in Korea and India appears relatively stable. Investment in China and Japan has been more volatile, alternating between periods of substantial activity and years with minimal or no investment, as in 2025.
The syndicated lending market in Asia reached USD 3.6 trillion by the end of 2025, accounting for a quarter of the region’s corporate debt (Panel C). This indicates a relatively lower level of development compared with global markets, where syndicated lending segment represents 38% of total debt. Outstanding syndicated lending declined by 6% in real terms in 2025 compared to the average outstanding stock between 2022 and 2024, thereby continuing its downward trajectory that began in 2021 (Figure 1.16, Panel D).
1.1.4. Interest rates
Interest rate developments in sovereign bond markets are an important determinant of financing conditions in the broader economy, as government bond yields serve as benchmark rates for corporate bonds and other financial instruments. Following the global inflationary shock of 2022, sovereign bond yields increased markedly across most Asian economies, although developments have remained heterogeneous across the region (Figure 1.17).
Higher‑income jurisdictions consistently exhibit substantially lower sovereign bond yields than lower‑income jurisdictions. Over the past five years, Japan’s long‑term government bond yields have risen markedly amid the reflation of the domestic economy, whereas yields in China have trended downward, reflecting easing inflationary pressures. As of March 2026, double‑digit 10‑year government bond yields are observed only in Sri Lanka and Pakistan.
Amid persistent inflationary pressures, Asian bond yields have tended to (re-)increase recently
Note: End‑of‑period values for local‑currency bonds. Latest observations as of 17 April 2026. Columns are ordered by yields as of April 2026, in ascending order. Data is not available for Bangladesh, Cambodia, Lao PDR and Mongolia. ISO country codes are shown. Each jurisdiction is colour-coded using conditional formatting based on its own values over the period shown. Darker red indicates the highest value and darker blue the lowest value recorded for that jurisdiction over the period shown.
Source: LSEG; Bloomberg.
Recent geopolitical tensions linked to the conflict in the Middle East and associated disruptions to energy supply routes have increased inflationary pressures across parts of Asia, potentially constraining the scope for further monetary easing. Asia is the largest buyer of oil and gas transiting through the Strait of Hormuz, accounting for roughly 80% of LNG shipments via this route. While inflation expectations remain broadly anchored in most economies, a prolonged energy shock could weaken currencies and entrench inflation, potentially prompting a pause in interest rates cuts (Pescatori and Srinvasan, 2026[12]).
The sensitivity of interest rates to these major global events differs across Asian sovereign bond markets, reflecting differences in economic fundamentals and exposure to global trade and energy markets (Figure 1.18, Panel A). The announcement of US tariff measures in April 2025 was generally associated with declining sovereign bond yields in lower-risk markets such as China, Japan, Hong Kong (China) and Korea, presumably pointing to flight-to-quality and safe-haven effects. By contrast, sovereign yields increased in higher-risk markets, including Indonesia, Sri Lanka and Pakistan, indicating rising risk premia and tighter financing conditions.
The consequences of the conflict in the Middle East have been markedly different. Except in China, all Asian sovereign yields increased considerably. This likely indicates that this event was predominantly perceived as an inflationary shock through increasing energy prices, with expectations of monetary tightening stronger than potential safe-haven effects.
Heightened trade policy uncertainty affected sovereign bond yields differently across Asia
Note: Sovereign bond yields refer to the 10-year benchmark yield. The event window for tariff announcement is defined as 23 March to 11 April 2025, while the event window for the conflict in the Middle East crisis spans 27 February to 27 March 2026. Jurisdictions are ordered according to the yield change around tariff announcement. Panel B is based on weekly data covering the period from January 2020 to April 2026. “Common Factor” refers to the first principal component of weekly yield changes across the 13 jurisdictions. “Global Risk Sentiment” is proxied by the weekly change of the CBOE VIX volatility index. “Trade Policy Uncertainty” refers to the weekly change of the Trade Policy Uncertainty Index. Data is not available for Bangladesh, Cambodia, Lao PDR, and Mongolia.
Source: LSEG; Bloomberg; Caldara et al, (2020[5]), Trade Policy Uncertainty Index, https://doi.org/10.1016/j.jmoneco.2019.11.002; OECD calculations.
The relationship between sovereign bond yields and global risk sentiment points to similar flight-to-quality dynamics (Figure 1.18, Panel B). Lower-risk sovereign markets generally exhibited low or negative correlations with changes in global risk sentiment, while higher-risk markets showed more positive correlations, consistent with stronger sensitivity to shifts in investor risk appetite. Pakistan and Sri Lanka stand out for their comparatively low correlations with both global risk sentiment and the common regional factor extracted from sovereign yield movements, suggesting that domestic factors played a more dominant role in driving bond market developments in these economies. By contrast, correlations with the common factor were highest in regional financial hubs such as Hong Kong (China) and Singapore, reflecting their stronger integration into regional and global financial markets. Overall, relatively weak correlations with the Trade Policy Uncertainty Index suggest that trade-policy-related risks primarily affected sovereign bond markets through specific episodes of market stress rather than as a persistent driver of sovereign yields over the period.
As mentioned above, changes in sovereign yields and monetary policy conditions also influenced corporate borrowing costs across the region. Historically, the median interest rate at issuance for investment-grade borrowers in Asia has remained below the global median, although both followed broadly similar trends. In 2022, inflation surpassed central bank targets in most Asian economies, reflecting higher global food and energy prices, depreciating local currencies against the US dollar, and narrowing output gaps (Srinivasan and Peiris, 2022[13]). China was an exception to this trend, with a relatively low level of inflation and a looser monetary policy stance.
The increase in policy rates following the global inflationary shock in 2022 contributed to the median interest rate at issuance for Asian investment-grade companies increasing by 219 basis points to 3.9% in 2023 from the low reached in 2020 (Figure 1.19, Panel A). Despite this increase, it remained 1 percentage point below the global median. This is partly a composition effect, as the value-weighted average credit rating of Asian investment grade issuers is a full notch higher than the global equivalent. It may also partly reflect more moderate inflationary pressures in Asia, which shaped the monetary policy environment over the period.
By 2025, interest rate at issuance declined to 2.7%, compared with a global median of 4.4%. Financial conditions eased across much of the region despite heightened tariff-related uncertainty, supported by a weaker US dollar, narrower credit spreads and rising equity valuations. With inflation running below target in many economies, central banks had greater scope to implement monetary easing, helping to mitigate potential tariff-related shocks (Pescatori and Srinivasan, 2025[14]). The sharp decline in interest rate at issuance brought borrowing costs at issuance to 23 basis points below the effective cost of outstanding debt. By contrast, at the global level, interest rates at issuance stood 42 basis points above the cost of outstanding debt (OECD, 2026[11]).
Financial conditions in Asia eased despite heightened tariff-related uncertainty
Note: Refers to non-financial companies. Interest costs are based on coupons or, when unavailable, the yield to maturity at issuance. Full lines show medians, shaded areas show the range between the 25th and the 75th percentiles. The cost of outstanding debt is estimated for fixed-rate debt by weighting coupon buckets (in 50 basis point increments) by outstanding amount.
Source: OECD Capital Market Series dataset, LSEG, see Annex A for details.
Conversely, non-investment grade issuers in Asia have generally faced higher interest rates than the global median. Up to 2021, interest rates at issuance were elevated, before becoming increasingly volatile amid a sharp contraction in issuance volumes in this segment. More limited monetary transmission and higher risk premia in this segment contributed to weaker improvements in borrowing conditions. By 2025, issuance costs for non-investment grade corporate bonds in Asia exceeded the effective cost of outstanding debt by 178 basis points, more than 100 basis points higher than the comparable global figure (Figure 1.19, Panel B). As of end-2025, non-investment grade bonds accounted for 19% of outstanding non-financial corporate debt in the region.
Differences in financing conditions also emerged across sectors during the period of heightened trade policy uncertainty. Throughout 2025, median interest costs at issuance for companies in tradable sectors remained below those of domestically oriented firms in China, while in Japan borrowing costs for tradable sectors increased marginally immediately following the tariff announcements. In the rest of Asia excluding China and Japan, firms in tradable sectors generally faced higher borrowing costs. Although this may seem to point to a lack of broad-based impact on corporate borrowing costs in major economies, it may partly reflect corporates timing their debt issuance to periods of more favourable market conditions (i.e. companies that would have faced higher borrowing costs opt not to issue at all during periods of stress).
At the same time, firms in tradable sectors experienced greater dispersion in borrowing costs, particularly in the upper part of the interest-rate distribution in the months following the tariff announcements (Figure 1.20). This pattern may reflect investor concerns regarding weakening credit quality among relatively riskier firms exposed to trade disruptions. The increase in dispersion was most pronounced in Japan, especially between May and August, and to a lesser extent in the rest of Asia excluding China and Japan, where wider dispersion across firms may also reflect the comparatively less developed nature of some regional corporate bond markets. By contrast, interest-rate dispersion in China remained relatively contained, aside from a temporary widening in the upper quartile between August and October.
Interest rates at issuance show increased dispersion for tradable sectors following tariff announcement
Note: Refers to non-financial companies. Interest costs refer to fixed rate debt and are based on coupons at issuance or, when available, the yield to maturity at issuance. Full lines show medians, shaded areas show the range between the 25th and the 75th percentile.
Source: OECD Capital Market Series dataset; LSEG; see Annex A for details.
1.1.5. Refinancing risks
The structure of sovereign bond markets in Asia suggests comparatively limited exchange-rate and refinancing vulnerabilities relative to many other regions, helping contain refinancing and exchange-rate risks during the period of heightened trade policy uncertainty and geopolitical tensions in 2025-2026.
Exposure to foreign currency debt remained comparatively low across the region, while fixed-rate bonds denominated in local currency accounted for the majority of outstanding marketable debt (Figure 1.21, Panels A). Limiting foreign currency exposure is an important element of sovereign risk management, as it reduces vulnerability to exchange-rate fluctuations and external financing shocks (OECD, 2025[15]). The predominance of fixed-rate instruments also helped reduce refixing risks during periods of elevated interest rates.
Near-term refinancing risks also remained relatively contained in many Asian sovereign bond markets. The average term-to-maturity (ATM) of marketable debt in Asia remains above global averages, while only a relatively small share of fixed-rate bonds denominated in local currency have maturities of less than three years (Figure 1.21, Panels B and C). Longer maturities generally strengthen fiscal resilience by reducing refinancing needs during periods of market stress and rising yields. In Asia, long maturities are particularly pronounced in institutionally developed markets such as Japan and India, where governments have extended sovereign yield curves through regular benchmark issuance and strong domestic investor bases. China has also increasingly expanded issuance of longer-term sovereign bonds in recent years (Bloomberg, 2025[16]).
At the same time, stronger reliance on long-term debt may also reflect less developed short-term money and bill markets, potentially constraining cash-management flexibility and the availability of high-quality short-term collateral. This trade-off remains particularly relevant in markets where domestic money markets are still relatively shallow or segmented.
Asia is characterised by a high share of local currency bonds and long maturities of outstanding bonds
Notes: Emerging markets include developing economies. Figure based on year‑end values in US dollar terms. Panel B includes only domestic currency bonds and bills. Panel C includes only domestic currency fixed-rate bonds.
Sources: 2025 OECD Survey on Central Government Marketable Debt and Borrowing, LSEG; OECD calculations; see Annex A for details.
Corporate bond market structures also played an important role in supporting financing resilience during 2025. While corporate bond markets in Asia remained resilient, companies and investors in few markets nevertheless exhibited greater caution regarding long-term financing commitments. Average bond maturity in the region was almost similar to its 3-year average level, consistent with broader global trends (Figure 1.22).
Asian corporate bond markets remained accessible in 2025, but issuers opted for shorter maturities
Note: Refers to non-financial corporate bonds. Includes only markets with at least 10 non-financial corporate bonds issuance in 2025.
Source: OECD Capital Market Series dataset; LSEG; see Annex A for details.
Refinancing conditions in Asian corporate bond markets could become more challenging if elevated inflationary pressures constrain monetary easing and contribute to renewed increases in interest rates. This is particularly relevant given that 43% of outstanding investment-grade debt and 44% of non-investment-grade debt are due for refinancing over the next three years (Figure 1.23).
A large share of Asian non-financial corporate debt must be refinanced over the next three years
Note: Refers to non-financial companies.
Source: OECD Capital Market Series dataset, LSEG, see Annex A for details.
1.1.6. Credit quality and the investor base
Structural characteristics of Asian bond markets, including relatively strong credit quality and a predominantly domestic investor base, helped cushion the impact of heightened trade policy uncertainty and geopolitical tensions in 2025-2026. At the same time, significant differences across sovereign ratings and market structures point to uneven resilience across the region.
Compared with other regions, Asian government bond markets are generally characterised by relatively low shares of foreign investor holdings and a comparatively high reliance on domestic investors (Figure 1.24, Panel A). In Japan, a significant share of government debt is held by the domestic central bank, while China’s sovereign bond market is dominated by domestic commercial banks. In many other Asian economies, domestic pension funds and insurance companies also play an important role in government bond markets.
From a risk perspective, a low share of government debt held by foreign investors may cushion countries against external shocks, thereby supporting domestic economic stability. Empirical evidence indicates that an increased presence of foreign investors in local currency bond markets raises the sensitivity of both bond yields and bid-ask spreads to global risks (IMF, 2025[17]). At the same time, a low participation of foreign investors may point to limited integration of domestic financial systems into global markets, potentially resulting in weaker capacity to absorb additional debt and greater sensitivity to domestic shocks. Debt managers therefore need to carefully weigh the benefits of a domestically focused market against the costs of increased reliance on foreign investor demand (OECD, 2026[11]).
Sovereign credit ratings across Asian economies also exhibit substantial heterogeneity (Figure 1.24, Panel B). Excluding China and Japan, sovereign ratings are concentrated in the lower investment-grade segment, with a large BBB cluster driven primarily by India and several Southeast Asian economies. At the upper end of the distribution, Singapore remains the only AAA-rated sovereign in the region. At the same time, the continued presence of sovereigns in the B and CCC categories highlights persistent vulnerabilities and elevated credit risks in parts of the region. Sri Lanka, despite exiting formal default following debt restructuring, remains in the high-risk category amid fragile debt sustainability and limited market access.
Asian government bond markets are generally characterised by a low share of debt held by foreign investors
Notes: Panel A shows the composition of general government debt values for 2024; Panel B shows data for 2025. Values are weighted by USD-amount of total outstanding marketable debt.
Sources: Sovereign investor base estimates by Arslanalp and Tsuda (2014[18]); LSEG; OECD calculations; see Annex A for details.
Corporate bond markets in Asia have historically displayed relatively strong credit quality compared with global markets, partly reflecting the large role of Japanese issuers, which maintained ratings above the regional average until 2022. Although overall credit quality weakened over the past two decades in line with global trends, issuance quality improved from 2020 onwards. However, comparisons across regions should be interpreted with caution, as a smaller share of Asian corporate bonds is rated by international credit rating agencies relative to global markets (OECD, 2025[19]).
In 2025, Asian corporate bond issuance showed a higher share of AA- and BBB-rated issuers relative to the last 15-year average, alongside a decline in BB-rated issuance. This pattern may partly reflect the higher borrowing costs faced by lower-rated issuers, which may have discouraged weaker firms from accessing bond markets during periods of tighter financing conditions.
Strengthening market resilience and broadening access to financing. Heightened trade policy uncertainty and geopolitical tensions have increased volatility across market segments and tightened financing conditions. Despite this, capital markets have continued to play a critical role in supporting corporate financing and absorbing shocks, particularly for established firms and tradable sectors. These developments once again underscore the importance of capital market financing during periods of stress. Looking ahead with the existing geopolitical tensions, risks may intensify, particularly for emerging markets, where rising external pressures including fuel supply and costs could weigh on equity valuations and trigger capital outflows, leading to weaker market performance and heightened volatility.
Against this backdrop, it is important to recognise the heterogeneity of Asian capital markets, where levels of development vary widely and less developed markets may be more vulnerable to external shocks. In this context, the continued development of public equity markets, including by easing listing requirements, strengthening disclosure and investor protection, and fostering deeper and more inclusive capital markets across economies, can support broader access to financing.
Promoting the growth of private equity and venture capital markets. Private equity and venture capital activity was affected by changing market conditions in 2025, with fundraising and deal-making contracting during periods of heightened uncertainty, even as public markets continued to provide financing. Given Asia’s significant role in global venture capital activity and its importance for financing high-growth and innovative firms, maintaining the stability of these markets is critical for long-term growth. Policy attention may focus on supporting resilient private equity and venture capital ecosystems by strengthening exit channels, enhancing regulatory clarity and fostering stable long-term capital sources, helping sustain investment in growth companies across the cycle.
Deepening and diversifying corporate debt markets. Corporate debt markets in Asia continued to expand in 2025, supported by strong corporate bond issuance, even as syndicated lending declined and private credit remained limited and volatile. However, maturities of corporate bonds shortened and refinancing needs remain elevated, increasing vulnerability to future rate increases. Market access also shifted towards higher-rated issuers, indicating tighter financing conditions for lower-rated firms.
Against this backdrop, the further development of corporate debt markets remains critical, including through measures aimed at enhancing market depth and liquidity, improving access for a broader range of issuers, and supporting the development of complementary financing channels such as private credit. Diversifying sources of financing is particularly important in economies where corporate bond markets remain less developed, helping reduce reliance on bank financing and broaden funding options for companies.
Supporting cross-border investment and regional integration. Recent developments show that trade reallocation and shifting capital flows, particularly in the context of “China+1” dynamics, have led to more differentiated patterns across Asian economies. While some markets have benefited from increased inflows and production relocation, others have experienced outflows and weaker market activity, pointing to fragmentation alongside deeper integration. Heightened trade policy uncertainty and geopolitical tensions have also reinforced risk aversion and increased the sensitivity of cross-border flows to global shocks.
In this context, it is important to continue to reduce barriers to cross-border investment, harmonise regulatory and disclosure frameworks, and strengthen regional financial co-operation to improve capital allocation, deepen markets and enhance resilience to external shocks.
Improving the resilience of local-currency sovereign bond markets. Well-functioning local-currency sovereign bond markets are essential not only for cost-efficient public financing but also for the broader development of financial systems. Liquid government bond markets with well-defined yield curves support the growth of corporate debt and equity markets. While Asia’s sovereign bond markets have shown resilience, recent shocks highlight the importance of debt structure, market functioning and investor composition in shaping responses to global risks.
Strengthening the resilience of local-currency sovereign bond markets involves several key policy considerations. First, particularly in less developed markets strengthening benchmark yield curves through regular issuance and reopenings is critical to support liquidity and anchor investor expectations. Second, the development of deep and liquid money markets remains essential, notably through regular bill issuance and repo frameworks, enhancing both financial sector efficiency and financing capacity during stress. Third, issuers may diversify their investor base through transparent practices and improved investor relations, including providing information in English and aligning with international standards.
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← 1. Tradable sectors are defined using the Reference data Business Classification (TRBC) Industry Description activity-level codes and include goods-producing industries with significant exposure to international trade, which are more likely to be affected by tariff announcements. This classification is a simplified proxy for tariff exposure, as not all firms in these sectors are exporters, and indirect effects may also affect firms in other sectors.