Australia's AMP to set up bond team in Asia

AMP Capital Investors, part of Australia's largest wealth manager AMP Ltd, is making a push in Asia to take advantage of improving sentiment towards the region's sovereign risk, a top executive at the fund management firm said.
AMP Capital has been pouring funds into Asia-Pacific since last year and plans to launch soon an Asian bond fund exposed to the region's top 10 currencies.
"Asian US dollar funds have been performing well since the Asian crisis on the slowly reducing perception of Asian sovereign risk," said Mark Beardow, AMP's head of fixed income. The fund management house, which has A$94 billion under management including around A$35 billion in fixed income, singled out Korea, Malaysia and Indonesia. Just last week, Indonesia recovered its coveted investment grade status from Fitch ratings. The ratings agency cited low public debt among the reasons for the upgrade.
The move crowns nearly a decade of steady economic improvement in the region, following the devastation of the Asian financial crisis of the late 1990s.
"In our opinion, Asian markets, in particular China and India, will substantially grow (corporate) bond markets in their own currencies because their rates of growth are going to require significant financing," he said. Beardow said Asia's under-developed bond markets are a result of a cautious approach of companies' balance sheets in the past decade, but believes that's about to change due to the world's increasing reliance on emerging markets.
To give an idea, China's local bond market climbed to $195 billion this year from a mere $3 billion in 2002, ThomsonReuters data shows. In the same period, Australia's credit market, one of the largest and deepest in the region, only trebled to A$70 billion.
For now, AMP Capital's upcoming Asian fund will keep a macro-economic view and invest in sovereign bonds and interest rates in ten currencies. They include China's yuan, Malaysia's ringgit, Philippines' peso, India's rupee , Korea's won, Indonesia's rupiah , Thailand's baht as well as Hong Kong, Taiwan and Singapore dollars. The unhedged fund, to be launched in the first quarter of 2012, will be denominated in Australian dollars with a return target of 9 percent over the medium term.
AMP Capital has yet to decide where to base its Asian fixed income hub but has indicated it will be either Singapore, Hong Kong, Mumbai or Beijing where the firm is already present. It is hoping to attract Australian as well as Asian clients who are already an important part of the firm's business.
"Our growth has been dominated by Asian clients," said Beardow, adding that one sixth of the fixed income customer base was Asia-sourced prior to AMP's acquisition of AXA Australia earlier this year.