There will be no direct competition for retail investment between the first two index funds in the second series of the Asia Bond Fund, according to one manager. When trade begins today, the Asia Bond Fund 2 (ABF2) Hong Kong Bond Index Fund will become the first bond index fund to be publicly traded on the Hong Kong exchange. Initial unit price of the fund will be set at $100. ABF2, a project announced by the Executive's Meeting of East Asia Pacific Central Banks group last month, comprises nine bond index funds with an initial investment of US$2 billion. The second fund, the US dollar-based Pan-Asia Index Fund, will be launched next month. 'There is strong demand for bond products in the market,' said Cecilia Chan, director and head of fixed income at HSBC Investments, manager of the Hong Kong Bond Index Fund. 'The two funds are based on different currencies and they are targeting different investors. So even though the Pan-Asia Index Fund is about to go on the market, there will be no direct competition between them.' Half of the US$2 billion initial investment will be allocated to the Pan-Asia Index Fund, which will be domiciled in Singapore and subject to regulatory approvals, listed in Hong Kong. The central banks group launched the Asia Bond Fund 1, the ABF2's predecessor, last year to stimulate interest among investors and broaden the domestic and regional bond markets in Asia. The Hong Kong Monetary Authority acts as co-ordinator for ABF2, which involves 11 central banks. The Asia Bond Fund initiative began in June 2002 in the wake of the Asian financial crisis, which was triggered partly by the region's excessive dependence on short-term finance and bank lending, rather than more stable long-term debt capital.