The two billion dollar Asian Bond Fund (ABF2), which is to invest in sovereign and quasi-sovereign local currency-denominated Asian bonds, has been completed, central banks from East Asia and the Pacific region (EMEAP) announced today.

HongKong and Shanghai Banking Corp, the Hong Kong unit of global banking giant HSBC, has been appointed as the master custodian for the funds, the central banks said.

"The ABF2 is a historic milestone in regional cooperation and an important catalyst to domestic and regional market development," they said in a statement released here.

"The developmental impact of the ABF2 is significant. It will raise investors' awareness and interest in Asian bonds by providing innovative, low-cost and efficient products in the form of passively managed bond funds or listed bond funds."

ABF2 fund managers will be working closely with the relevant authorities to seek authorization to offer the funds to other public and private investors, where appropriate through listing, in the next few months, the banks said in a statement.

Initial funding

ABF2 comprises a Pan-Asian Bond Index Fund (PAIF) and eight single-market funds.

The PAIF has initial funding of one billion dollars from the EMEAP group. State Street Global Advisors Ltd has been appointed the manager for the PAIF.

The EMEAP group has also allocated another billion dollars to the eight single-market funds.

In June 2003 EMEAP (Executive Meeting of East Asia and Pacific Central Banks) launched the first stage, ABF1, which invests in US dollar denominated bonds issued by Asian sovereign and quasi-sovereign issuers in EMEAP economies but excluding Australia, Japan and New Zealand).

EMEAP groups Australia, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore and Thailand.