Asian Central Banks Look to Invest Reserves in Region (Update1)
By Arijit Ghosh and Aloysius Unditu
March 24 (Bloomberg) -- Central banks from 16 Asian nations may invest
more of their $1 trillion of foreign reserves in the region's debt as
Federal Reserve interest-rate cuts reduce returns on U.S. assets.
``This is something that most of us, that are not yet investing in,
will be looking at,'' Bangko Sentral ng Pilipinas Governor Amando
Tetangco said in a March 23 interview in Jakarta. There can be ``some
kind of ****ft'' to Asian sovereign bonds, Central Bank of Sri Lanka
Governor Ajith Nivard Cabraal said in a separate interview on March
22, after a weekend meeting of policy makers from the region.
Asian countries pummeled by a financial crisis in 1997-98 have spent
the past decade hoarding reserves to help protect their economies from
external disturbances. A looming U.S. recession means the world's
biggest economy may no longer be the best place for the region to
invest those funds.
Indonesia's 10-year dollar-denominated bonds, for example, have a
yield of 6.06 percent compared with 3.33 percent for similar maturity
U.S. Treasuries. Local-currency Philippine debt maturing in 2018
yielded 7.16 percent as of March 19.
``Given the volatility in the U.S. dollar, some diversification won't
hurt,'' said David Cohen, an economist at Action Economics in
Singa****e. ``Even if the U.S. does slide into a recession, continued
growth in places like China'' may help maintain economic expansion in
the region.
U.S. Slowdown
Growth in the U.S. economy slowed to 2.5 percent in the fourth quarter
from a year earlier. Half of the economists in a Bloomberg News survey
this month expect a U.S. recession this year. China's economy expanded
11.2 percent in the three months ended Dec. 31, the fourth straight
quarter above 11 percent.
The dollar fell to a record low against the euro on March 17 before
posting its first weekly advance against the European currency on
March 21.
The U.S. Federal Reserve has cut its benchmark interest rate by 3
percentage points since September to help avert a recession in the
world's largest economy, amid its worst housing slump in 16 years.
Governors from the South East Asian Central Banks grouping, or SEACEN,
include Indonesia, Malaysia, Singa****e, Thailand, Brunei Darussalam,
Vietnam, the Philippines, Cambodia, Myanmar, South Korea, Mongolia,
Fiji, Nepal, Papua New Guinea, Sri Lanka, and Taiwan. They manage
about $1 trillion in reserves, according to Bloomberg data.
Sri Lanka's Cabraal said he is looking at ``possible avenues to invest
in other Asian countries.''
``It wouldn't have been on the agenda some years ago, but it is now
very much on the agenda,'' Cabraal said. ``You can see quite a clear
****ft in the mindset.''
Tetangco from the Philippines said central banks in the region will
have to make decisions about investing more in Asian debt ``at some
point in the future.''
``We are looking at the op****tunities for diversification into high-
quality assets such as sovereign or quasi-sovereign securities,'' he
said.
To contact the re****ter on this story: Arijit Ghosh in Jakarta at
aghosh@[EMAIL PROTECTED]
Aloysius Unditu in Jakarta at
aunditu@[EMAIL PROTECTED]
Updated: March 24, 2008 00:21 EDT
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