As I mentioned earlier, the HKMA has the honour of chairing the EMEAP Working Group to lead the initiative. This began in 2002 and in June of the following year, EMEAP launched ABF1. ABF1 invests in a basket of US dollar-denominated bonds issued by sovereign and quasi-sovereign issuers in eight EMEAP markets - China, Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand. It was a small but significant step forward. Think about it for a moment: eleven very different economies of different sizes, with different economic structures and stages of economic and social development, co-operating for the first time to set up a bond fund and lay the foundation for promoting the development of regional and domestic bond markets in the Asian region. 9. The next, bigger step was ABF2, which extends the concept to bonds denominated in Asian currencies. There are two parts to this: the Pan-Asia Bond Index Fund (PAIF) and eight Single-Market Funds. The PAIF is a single bond fund investing in sovereign and quasi-sovereign local currencydenominated bonds issued in the eight EMEAP markets, while the Single-Market Funds invest in similar bonds issued in the individual markets. So far, the PAIF and three Single-Market Funds in Hong Kong, Malaysia and Singapore have been listed. The remaining five Single-Market Funds will also be offered to the public within the next couple of months. I am glad to see that the ABF Hong Kong Fund has been well received by the market, growing by over 40% since its listing in June this year.
With over half of total trade in Asia being intra-regional trade, and with this proportion still on an increasing trend, economies in the region are becoming increasingly interdependent among themselves, arguably more so than each of them depends on the developed economies in Europe and America. By comparison, the degree of financial integration in Asia is disproportionately low. For example, all of the Asian economies have probably lent more individually to the United States than they have collectively to other Asian economies. 4. Whether we like it or not, we now find ourselves in the unenviable position of holding a substantial part of our savings in the financial liabilities of an economy that does not save, fearing that a diversification of a small part of such holdings might lead to a sharp fall in the value of the rest, thus shooting ourselves in the foot. We also find ourselves somewhat stuck with recycling a large part of our savings through the developed markets back into the region in a much more volatile form, occasionally creating havoc in our monetary and financial systems. 5. We find ourselves - we are told - contributing to the global imbalance by saving too much and spending too little, although those that tell us pay little attention to the fact that we do have typhoons and heavy rains, earthquakes and tsunamis, and we need to ensure that we are able to help ourselves as much as possible in case of need.