The second stage of the Asian Bond Fund (ABF) represents a historic milestone for central banking cooperation to promote the development of the domestic and regional bond markets in Asia, Hong Kong's Financial Secretary Henry Tang said here Thursday.

The Executives' Meeting of East Asia-Pacific Central Banks, or EMEAP, launched the fund Thursday.

"I am particularly pleased that EMEAP has chosen Hong Kong as the preferred center for the listing of the Pan-Asian Bond Index Fund, a key component of ABF2 and a new asset class for regional and global investors in Asia," he said.

The EMEAP Group has 11 central bank members, including the HongKong Monetary Authority (HKMA), in the East Asia and Pacific region.

The two billion US dollars ABF2 will invest in domestic currency bonds issued by issuers in all EMEAP economies except Australia, Japan and New Zealand. All 11 EMEAP members will investin ABF2.

The EMEAP Group has finalized the study on the structure and design of the ABF2, which comprises the Pan-Asian Bond Index Fund and eight Sub-Funds.

Implementation of ABF2 is divided into two phases: Phase 1 investment will be confined to EMEAP central banks only whereas inPhase 2 the eight Sub-Funds and the Pan-Asian Bond Index Fund willbe open to investment by other public and private sector investors.

The aim is to have both the Pan-Asian Bond Index Fund and the Hong Kong Sub-fund list on the Stock Exchange of Hong Kong, subject to the approval of relevant authorities.

Chief Executive of HKMA Joseph Yam said the authority has played a leading role in helping promote the bond markets in the region, which will over time improve the efficiency of financial intermediation in Asia.

Yam said the development of deep and liquid bond markets in EMEAP economies will in turn contribute to greater financial stability in the region. Apart from market development benefits, the ABF2 also offers a good opportunity for asset diversification and yield enhancement for central bank reserves.

Source: Xinhua