Central banks unveil structure for second Asian Bond Fund
AFP, Kuala Lumpur
Asian central banks Thursday unveiled the initial structure of a planned second Asian Bond Fund (ABF) to invest in debt securities denominated in local currencies as part of efforts to boost regional financial cooperation. They gave no timeframe for when it would be launched. In a statement released here, the 11-member Executives' Meeting of East Asia and Pacific Central Banks (EMEAP) Group said it had completed an initial study on ABF2 which would be designed to facilitate investment by public and private sector investors. ABF2 followed the successful launch in June 2003 of the first one-billion-dollar ABF which is was now fully invested in US dollar-denominated regional bonds and marked another important milestone in regional cooperation, it said. Under a recommended preliminary framework, it said ABF2 would consist of two components -- a Pan-Asian Bond Index Fund (PAIF) and a Fund of Bond Funds (FoBF). "It is intended that the ABF2 funds will be passively managed against a set of pre-determined benchmarks, covering local-currency bonds issued by sovereign and quasi-sovereign issuers in EMEAP economies," the statement said. "The EMEAP Group believes that the developmental impact of the ABF2 will be significant. ABF2 will promote the development of index bond funds in the regional markets and at the same time, enhance the domestic as well as regional bond market infrastructure." EMEAP groups Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore and Thailand. It said the PAIF, a single bond index fund investing in local currency-denominated bonds in EMEAP economies, would act as a convenient and cost-effective fund for investors seeking a well-diversified exposure to Asian bond markets. The FoBF is a two-layered structure, with a parent fund investing in a number of country sub-funds comprising local currency-denominated bonds in EMEAP nations, it said. The FoBF sub-funds are aimed at providing local investors with low-cost and index-driven investment vehicles and at the same time giving international investors the flexibility to invest in the Asian bond markets of their choice. "In determining the size of ABF2, EMEAP members will be careful to limit the size of the total investment so that it will not have any crowding out effect on private sector investors," it said.
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