Asian bond fund will boost cooperation, S&P says

Asian bond fund will boost cooperation, S&P says

The Jakarta Post, Jakarta

Standard & Poor's Ratings Services (S&P) said on Monday the
new US$1 billion Asian Bond Fund would increase cooperation among
the region's monetary authorities and develop Asia's capital
markets.

"The creation of the fund is a positive development in
regional financial cooperation, and S&P's applauds this as a
tangible step in the evolution of a regional bond market," said
Cecile Saavedra, S&P Region Head for Asia-Pacific, in a press
statement.

The fund will be used initially to buy U.S. dollar-denominated
sovereign and quasi-sovereign debt in the secondary market and
purchases will be targeted at debt issued by the eight non-
developed members of the grouping: China, Hong Kong, Indonesia,
Malaysia, the Philippines, Singapore, South Korea, and Thailand.
The other three members are Australia, Japan, and New Zealand.

Standard & Poor's rates more than US$52 billion in sovereign
and sovereign-related U.S. dollar debt issued by these eight Asia
countries.

The totals for each country vary greatly and carry ratings
ranging from 'AAA' to 'B-'.

"Although the thinking behind the establishment of this fund
is commendable", said Ms. Saavedra, "the nominal size of the fund
indicates that the initial practical impact will be limited".

Moreover, she notes, "as seen from the information above, some
of these countries have not been major issuers and there is
limited secondary trading".

She further said S&P's would like to see over the longer term
a greater participation in the bond market by the private sector.
"Only with active participation by private investors and private-
sector issuers will there be a vibrant and effective regional
bond market".

Thai premier Thaksin Shinawatra announced last week the launch
of the bonds, to be backed by 11 countries in the Asia-Pacific
region.