AXA awaits RI reforms before investing<\/p>\n
HONG KONG (Dow Jones): Until Indonesia shows a commitment to
\nimprove bankruptcy laws and creditor protection, AXA Investment
\nManagers, the investment arm of French insurance giant AXA S.A.
\n(AXA), will refrain from putting more money into the country's
\nassets, said a senior official at the company.<\/p>\n
\"As long as there isn't the political will to solve the
\nproblems of existing debt ... we're not ready to invest new funds
\nin Indonesia,\" said Nadine Tremollieres, head of Fixed Income
\nEmerging Markets, in a recent interview with Dow Jones Newswires
\nin Paris.<\/p>\n
It's no surprise AXA puts so much interest in Indonesian
\ncreditor protection issues. The company still carries a lot
\nIndonesian assets on its books from investments made in the mid-
\n1990s. Some of those assets are currently trading at between 5
\npercent and 10 percent of face value.<\/p>\n
\"We inherited in our portfolios some Indonesian companies in
\ndefault for which our hope of recovery in the past three years
\nwas equal to zero,\" she said.<\/p>\n
So now, even if Indonesian bonds pay a spread of 900 basis
\npoints over U.S. Treasurys, they don't look all that attractive.<\/p>\n
\"We still remember what happened three years ago,\" she said.<\/p>\n
Tremollieres reckons that other foreign investors feel the
\nsame way. Even the proposed US$$3.1 billion bond exchange by
\nIndonesia's biggest issuer Asia Pulp & Paper won't change AXA's
\nopinion about the country's will to restructure its debt.<\/p>\n
APP's exchange offer \"gives little hope in the sense that they
\nare not tackling the problem,\" she said. \"For the moment, they're
\ntrying to solve it to the detriment of their creditors. And
\nthat's not really acceptable.\"<\/p>\n
APP's offer is still under review for approval at the U.S.
\nSecurities Exchange Commission. Whatever the outcome, AXA - as
\none of the creditors - will accept what is offered. But if APP
\ndoesn't perform any structural changes it will \"reinforce our
\nopinion not to invest more in that country,\" Tremollieres said.<\/p>\n
Besides Indonesia, AXA is also very cautious about other
\nsoutheast Asian countries like the Philippines, where shaky
\neconomies and political instability make investments too risky.<\/p>\n
Turning to product sectors, Tremollieres said that AXA would
\nlikely stick to regular U.S. dollar denominated government bonds
\nin most countries of the region.<\/p>\n
In terms of currency, AXA has been in the process of
\nreorganizing and reallocating its investments in Asia Pacific for
\nthe past year and a half to two years. The insurer is increasing
\nits exposure to Hong Kong, Singapore and South Korea's local
\ncurrency markets.<\/p>\n
Hong Kong and Singapore could also offer some opportunities in
\nterms of high-yield bonds. But the overall Asian high-yield
\nmarket isn't likely to pick up any time soon, Tremollieres noted.<\/p>\n
\"Asia is still in a situation where you find (high) spreads on
\nsovereign bonds, so seeking an extra 150 or 200 basis points of
\nspread by taking a risk on a corporate rather than a sovereign\"
\nisn't worth it, she said.<\/p>\n
Hong Kong and Singapore are different because sovereign bonds
\nthere offer very little yield. But South Korea, Malaysia and
\nThailand, let alone the Philippines and Indonesia, aren't ready
\nfor a high-yield market.<\/p>\n
\"The crisis is still in everyone's mind and isn't completely
\nsolved,\" Tremollieres said.<\/p>",
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