These markets first became popular as proxies for currency plays but are now gaining traction with the growth in demand for fund management expertise.

"The theme of Asian appreciating currencies has sparked growing interest from offshore investors," said Phoon Chiong Tuck, chief investment officer with Deutsche Asset Management Asia, which has around billion under management.

"The interest from offshore investors is growing, but the dominant interest is onshore ... presently most of the demand for local fixed income comes from domestic institutions," he said.

His fund has local fixed income presence in India, South Korea, Singapore and China and he expects to add more countries in the region to that list.

The size of the local currency debt market in Asia is estimated at .6 trillion, about 10 times bigger than the Asian dollar-denominated bond market, but it has suffered from problems such as lacking in market depth and lacking a broad range of different types of investor.

China and India, Asia’s biggest economies outside of Japan, only offer limited access to global investors, Phoon said.

"You need to encourage diversity of investor base in the market. That will bring greater liquidity into the market and bring in greater stability in the market," said Phoon.

He added that if corporate borrowers were to issue more long term debt, there would be greater equilibrium between lenders and issuers. That would prevent any distortions in price movements and ensure greater market stability.

Asia is keen to develop domestic bond markets to reduce a reliance on bank lending, which was partly blamed for escalating the region’s financial crisis in 1997/1998, when a flight of foreign capital sent Asian currencies tumbling.

Since the crisis, companies in Asia have slashed debt and reduced interest costs to clean up their balance sheets. This has been in part responsible for a jump in the number of credit ratings upgrades in Asia and a decline in the downgrades.

"The trend of deleveraging may have reached a level where they start borrowing again ... but by no means will the increased debt issuance reflect that corporates are taking more risks — they are still quite healthy," Phoon said.

Asian local currency bonds account for about five percent of the global debt market and some analysts say the figure could be higher given strong levels of economic growth in recent years.

Phoon said that contrary to general expectations of an economic slowdown, growth in Asia in the first quarter appeared to be strong.