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RBNZ invests in Asian Bond Fund 2


RBNZ invests in Asian Bond Fund 2

The Reserve Bank today announced that it intends to invest USD 50 million in the newly created EMEAP Asian Bond Fund 2 (ABF2) as part of its foreign reserves.

The Reserve Bank of New Zealand is a longstanding member of EMEAP (Executive Meeting of East Asian and Pacific central banks), a group comprising the central banks of Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, The Philippines, Singapore, and Thailand.

ABF2 will be a fund devoted to investing in bonds denominated in the home currencies of EMEAP countries and follows on from ABF1 launched in June 2003 which invested in USD denominated bonds of EMEAP nations.

The key features of ABF2, as currently proposed, include:

* An initial size of around 2 billion US dollars and will initially be offered only to EMEAP members;

* Nine sub-funds; one fund in each of the 8 EMEAP countries that have relatively less developed bond markets (i.e. excluding Australia, Japan and New Zealand); and a Pan Asian Index Fund including a selection of benchmark bonds across the EMEAP region. Eligible investments in any of the funds will be bonds issued by EMEAP sovereigns, supranational agencies and government supported agencies in EMEAP countries; and

* The ability for private sector investors to invest in the sub-funds sometime during 2005.

The motivation for the Asian Bond Fund is a desire to see the bond markets of EMEAP countries develop more quickly. It is expected that ABF2 will play a catalytic role in the development of the EMEAP bond markets, by helping promote new financial products, improving market infrastructure and minimising regulatory hurdles. This should help promote the soundness and efficiency of financial markets and systems in the wider EMEAP region and thus in New Zealand, given the importance of linkages between Asian markets and economies and New Zealand.

Details on the Fund can be found at the official EMEAP website at http://www.emeap.org.

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