Wednesday, July 9, 2008

AmInvestment starts RM300m bond fund

BusinessTimes

AMINVESTMENT Bank Goup has started a RM300 million bond fund to invest in government and corporate papers issued in local currencies that will benefit from the world's rising economies from Asia to Latin America.

Amid a slowing global economy, weaker corporate earnings growth and rising inflation, the AmEmerging Markets Bond will provide investors an alternative to the currently volatile stock market.

"Local bond markets appear to offer attractive yields and great additional returns. These can be achieved through further yield compression and also through currency appreciation," managing director T.C. Kok said in Kuala Lumpur yesterday.

At least 95 per cent of the fund will be fed into a bigger fund managed by Investec Asset Management, which manages US$66 billion (RM215.16 billion). The mother fund was started in October last year and has chalked up some US$15 million to US$20 million (RM48.9 million to RM65.2 million) in assets.

As at end-May, 60 per cent of the fund was invested in countries with Single A ratings. These include Russia, Colombia, Indonesia, Qatar, Malaysia and Mexico.

Most of the money was put into government bonds, which proves suitable in today's environment as they are shielded from the subprime crisis, AmInvestment's director of retail funds Ng Sze How said.

Investec's director for regional business development KK Cheung estimated an annual return of 8 to 10 per cent for the fund, which adopts an active strategy to pick the best countries and shorting the worst.

Cheung said the fund will gain from the structural improvement in the emerging economies, which may boost the country's rating and in turn push up prices of the papers.

The fund may benefit from the potentially stronger Asian currencies against the US dollar. A higher bond yield, which goes in tandem with the rising inflation, will also benefit the fund, Cheung said.

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