Billion-dollar Asian bond fund launched in Bangkok
Billion-dollar Asian bond fund launched in Bangkok
The Jakarta Post, Jakarta
Thai Prime Minister Thaksin Shinawatra on Monday launched a billion-dollar Asian Bond Fund (ABF), backed by 11 Asian economies, which will focus on investing in regional government bonds.
Thailand, Indonesia, Malaysia, Singapore, the Philippines, China, Hong Kong, South Korea, Japan, Australia and New Zealand are the participating economies.
"Developed countries know how to use instruments to (create) capital but countries in Asia, the majority still don't have enough access to that kind of instrument yet. This is the first step," Shinawatra told reporters at a news conference in Bangkok as quoted by AFP.
The bond fund is the brainchild of the Thai premier, who said he wanted to promote regional financial stability and minimize the risk of a repetition of the 1997-98 Asian economic crisis.
Thailand initially committed US$200 million to the fund. However, Thaksin said other countries had contributed more than expected, so it reduced its contribution to $120 million.
A separate statement from the 11-member Executives' Meeting of East Asia and Pacific Central Banks Group (EMEAP), which is overseeing the setting up of the fund, said the fund would invest in a basket of U.S.-dollar denominated bonds issued by sovereign and quasi-sovereign Asian issuers in the economies of the participating countries other than Japan, Australia and New Zealand.
The fund is to be managed by the Bank for International Settlements, Thaksin said.
In Jakarta, Bank Indonesia also held a press conference in relation to the launching of the fund.
BI deputy governor Taslim Tadjudin said Indonesia has committed $50 million to the fund. The contribution was taken from the country's foreign exchange reserves which currently stand at more than $33 billion.
"Asian bonds have higher yields than traditional bonds issued by developed countries. Additionally, having an external fund manager to manage our investments will yield better results," Taslim said.
Taslim was confident Indonesia would get higher yields than it does in its current investments in U.S. Treasury bonds.
According to a BI press release, central banks and monetary authorities in the Asia Pacific region manage 56 percent or $1.2 trillion of the total world foreign exchange reserves. Most are invested in U.S. money markets or other G-7 countries.
While saying it is the government's decision when to issue sovereign bonds, Taslim said the Asian Bond Fund will provide a degree of certainty when the government decides to do so.
"The possibility of issuing sovereign bonds is still very much open. But it is up to the government, BI is only the facilitator. But at least, when they (sovereign bonds) are issued, we know there will be buyers," Taslim said.
The Ministry of Finance had planned to issue sovereign bonds next year for the first time since the 1997 crisis, to help finance the state budget.