IMF: Asian Bond Fund A Positive Step But Details Unclear<\/p>\n
Dow Jones
\nBangkok<\/p>\n
The International Monetary Fund (IMF) on Tuesday welcomed the
\ncreation of the Asian Bond Fund as a step toward greater regional
\ncooperation but noted that there were still several uncertainties
\nregarding implementation and future development.<\/p>\n
\"It's a good first step to the extent that it succeeds in
\nstrengthening the regional bond market, but it's unclear how it
\nwill develop from what we have now,\" Alessandro Zanello, IMF's
\ndivision chief for the Asia Pacific Department, said at the end
\nof a mission to Thailand.<\/p>\n
Asia-Pacific central banks on Monday announced plans to pool
\nUS$1 billion out of their foreign reserves to buy Asian
\ngovernment bonds in a bid to promote the region's bond markets
\nand reduce dependence on foreign capital.<\/p>\n
The group of the region's central banks known as Executives'
\nMeeting of East Asia and Pacific Central Banks said the fund will
\nbuy \"a basket of U.S. dollar-denominated bonds issued by Asian
\nsovereign and quasi-sovereign issuers\" from China, Hong Kong,
\nIndonesia, South Korea, Malaysia, the Philippines, Singapore and
\nThailand.<\/p>\n
\"The view is to create and enforce the capital markets within
\nthe region,\" Zanello said. \"How they will achieve that still
\nremains to be seen and a lot of details, complex facts, (and)
\nissues remain to be resolved.\"<\/p>\n
He said the fund's appeal lies in the idea that it will help
\nrecycle a pool of reserves from central banks to keep them within
\nthe region instead of investing them in U.S. Treasurys.<\/p>\n
\"But if you look down the line in life of the Asian Bond Fund,
\nyou see a system where perhaps an Asian bond will come to life, a
\nsecurity backed by a basket of other high quality bonds. Nobody
\nreally knows how that will happen and how soon.\"<\/p>\n
The central banks said they will consider buying bonds
\ndenominated in regional currencies once the fund is set up to
\nfurther broaden and deepen bond markets in the region.<\/p>\n
Thai Prime Minister Thaksin Shinawatra on Monday said the IMF
\nhas agreed to include funds invested in Asian dollar-denominated
\nbonds under the Asian Bond Fund in overall central bank foreign
\nreserves but it remains unclear whether local currency bonds
\nwould also qualify as reserves.<\/p>\n
\"It's a technical issue which assets should be counted as
\nreserves,\" Zanello said. \"The general rule of thumb is that you
\nneed something that is liquid and marketable.\"<\/p>",
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