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Indian investors cut U.S. bond holding
By siliconindia
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Saturday, 21 June 2008, 01:50 IST
Mumbai: Indian investors seem to b e indifferent to the bonds issued by Uncle Sam. Between April 2007 and April 2008 U.S. treasuries held by Indian entities have halved from $20 billion to $10.5 billion, reported The Economic Times.
Among the Indian entities that invest in U.S. bonds, the Reserve Bank of India accounts for a lion's share. The central bank has invested a little over three percent of the country's forex reserves of $312 billion as of end April 2008 in U.S. treasuries. Other investors are commercial banks, financial institutions and other eligible investors. Though the central bank has been steadily increasing its investment in securities, the data indicates that the U.S. treasury bond clearly is not finding favor with the central bank.
India has been diversifying its forex asset-base away from the SDR basket comprising, the U.S. dollar, the sterling pound, euro and the yen over the past seven-eight years. Though the currency break-up of holding is not made in the public domain, the Reserve Bank of India is said to be diversifying its forex asset investments in other currencies such as the Chinese yuan, the Swiss Franc, the Australian dollar and the Canadian dollar. These have been fairly stable over the past one year compared with the U.S. dollar.
While Indians shun U.S bonds, the country's peers in the BRIC bracket including Brazil, Russia and China have upped their exposure to U.S securities, despite the sub-prime and recessionary concerns. China has increased investments from $414 billion in April 2007 to $502 billion in April 2008. While Russia has increased this exposure by almost eight times from $7.7 billion in April 2007 to $60.2 billion in April'08. Brazil on the other hand more than doubled its exposure to the U.S. from $79.7 billion to $149.5 billion in the same period.
Indian investors have stayed away from the U.S. markets ever since the signs of the trouble arising from the sub-prime mortgage began to surface. According to the data posted on the U.S. Federal Reserve website on June 16, investments originated from India in US treasury bonds fell from $20 billion in April 2007 to $10.5 billion. While, according to the new series released from June, investments have dipped from $14 billion in June 20007 to $10.5 billion in April 2008.