As the 10th anniversary of the Asia crisis that began in 1997 approaches, it is timely to consider whether such a shock could recur. The question seems moot in the current climate. The Asian economic boom shows no sign of abating, current accounts are mostly in substantial surplus and most governments have bolstered their external positions with unprecedented reserves.

Vulnerability to a 1997-style financial crisis is much reduced and Standard & Poor’s recent stress tests suggest banking sectors and governments would cope with most conceivable shocks. Nevertheless, an important weakness – one that exacerbated the crisis a decade ago – remains. In spite of progress made by governments to foster financial stability and funding diversification for public and private sectors, Asia’s corporate bond markets – with the notable exception of Japan – are small and underdeveloped.