Emerging Markets China pushes ‘Asian investment corporation’ plan Emerging Markets - 3rd May 2010 By Anthony Rowley Asia needs to explore the idea of an “investment corporation” to help finance the continent’s development needs, especially for infrastructure, China’s vice finance minister Li Yong suggested yesterday. The idea resonated strongly with investment bankers and other private sector specialists at the ADB annual meeting. Asia has huge needs for development capital, and also has very large savings – and more effective mechanisms are needed for bringing these together, Li told Emerging Markets. At a seminar earlier, he had proposed a new “Asian investment corporation”. He declined to be drawn on whether China and other Asian economies might employ part of their massive foreign exchange reserves to finance the new mechanism, but pointed to Asian bond markets as a possible source of funding. Li’s idea drew support from private sector infrastructure specialists, who suggested that neither existing public institutions nor commercial banks can meet infrastructure financing needs. Li’s suggestion is “definitely in the right direction”, Harinder Kohli, former World Bank official and now CEO of the Washington-based Centennial Holdings research group, told Emerging Markets yesterday. Too much of Asia’s massive savings leaves the region and then “round-trips” back again via foreign loans or investments. If a mechanism can be devised to keep some of this capital at home to help finance regional investment needs that would be welcome, Kohli said. The fact that a senior Chinese official has broached the idea of a new Asian fund is seen as encouraging because of China’s huge savings. Veteran emerging markets investor Mark Mobius said the savers would be hungry for investment opportunities overseas once China’s capital controls are relaxed. Arvind Mathur, chairman of Private Equity Pro Partners of Gurgaon, India, said that if China were to invest a small fraction of its $2 trillion of foreign exchange reserves in a new Asian fund, that would have a huge impact on infrastructure needs. Chinese officials have voiced fears about having too much of the country’s reserves invested in dollar securities and are anxious to diversify into local currency-denominated infrastructure bonds, sources told Emerging Markets. Chinese private investors could also welcome non-dollar investments. China could be reluctant to pursue regional initiatives while it is preoccupied with its domestic economic agenda, William Knight, an advisory director of New York-based Campbell Lutyens, a private equity group involved in emerging market infrastructure financing, cautioned. Knight said that South Korea would be “perfectly placed” to take the initiative, given that it has the world’s largest state pension fund (NPS) and a very large sovereign wealth fund (KIC). Copyright © Euromoney Institutional Investor PLC 2005. All rights reserved. Asean launches credit guarantee fund Emerging Markets - 2nd May 2010 By Anthony Rowley A $750 million credit guarantee fund, aimed at galvanising Asia’s embryonic local-currency corporate bond market, will be launched today when finance ministers from the ASEAN+3 group gather in Tashkent for their annual meeting. The Credit Guarantee Insurance Fund (CGIF) will guarantee local-currency bonds issued by private companies in Asian capital markets to fund infrastructure and other projects. The CEGF “will serve an extremely useful purpose at a time when Western banks are effectively withdrawing from lending,” Arvind Mathur chairman of Gurgaon, India-based Private Equity Pro Partners and a former Citibank official told Emerging Markets. The fund will provide comforr to investors and it could become a "role model" for other such funds, thereby expanding the universe of bond investors, said Mathur. This will be one of the most concrete initiatives taken by the ASEAN+3 group – Japan, China, South Korea plus the ten ASEAN states – to foster bond market development, an ADB executive director told Emerging Markets. While the total amount involved is small compared to Asian corporate bond market volumes, the bulk of such bonds are denominated in dollars or other major currencies, the official said. The hope is that, once bond investors become familiar with local currencies, they will be prepared to subscribe to future issues without an official guarantee. This will open up a pool of capital that is largely untapped at present. “There is so much capital available in Asia, but so much of it flows out of the region,” the official said. “The challenge is to get these savings to stay in Asia and to find ways of putting them to productive use.” The ADB will subscribe $130 million of the funds available to the CGIF, which is expected to become operational next year, and will manage the facility as a trust fund. The remainder will come from ASEAN+3 member governments. Japan is expected to contribute around $200 million through the state-owned Japan Bank for International Cooperation (JBIC), a major funder of Asian infrastructure projects. The CGIF will receive premiums from issuers in return for its guarantees. This should enable borrowers lacking name-recognition to issue bonds outside their home markets, but denominated in their local currency rather than an international currency. ASEAN+3 schemes to foster bond market development have in recent years included Asian Bond Funds aimed at providing benchmarking indices and measures to develop market infrastructure, while the ADB has itself undertaken fund-raising issues in Asian currencies. But the CGIF is the first such initiative funded by the governments. Capital needs for infrastructure projects in Asia, including cross-border projects, have been estimated at more than $7 trillion over the next ten years. The bulk of this will need to come from bond markets and other private sources. The CGIF is being launched at a time when efforts are being intensified to involve the private sector in Asian infrastructure via so-called Public-Private Projects or PPPs. The ADB, together with the Asia Pacific Economic Cooperation forum (APEC) and the Australian Treasury is promoting the PPP formula by holding technical workshops across the region. Copyright © Euromoney Institutional Investor PLC 2005. All rights reserved.

Very impressive and very well spoken with lots of aplomb!!
Well done!!

Cheers
Praveen

Pablo Picasso  - "Computers are useless. They can only give you answers."