HONG Kong investors face an anxious wait for news on whether last week's decision by First Investments Limited (FIL) to suspend trading in its $1 billion open-ended bond fund has been successful in avoiding a dramatic price drop.
First Investments took the unprecedented move of suspending subscriptions and redemptions in the Leveraged United States Government Bond Fund after a 14.3 per cent plunge in its value.
The move, backed by brokers, followed the collapse earlier this month of prominent US hedge fund manager Askin Capital, which had invested in securities similar to those held by FIL's bond fund.
FIL managing director Geoffrey Mansfield said the main reason behind the suspension was that securities on packages of home mortgages had been trading at a large discount in the US following Askin's collapse.
This widened the bid-offer spread to up to 30 per cent compared to the normal spread of two to five per cent.
First Investments will not lift the trading ban until it is possible to price the investments fairly.
There is no association between First Investments or its bond fund with the collapsed Askin Capital.