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.