SYDNEY, Oct 28 (Reuters) - The Australian government could step in as a short-term buyer for some of the A$14 billion ($7.95 billion) in mortgage-backed assets currently locked up in frozen retail funds, the Australian Financial Review said on Tuesday.
The A$30 billion mortgage-funds industry has frozen dozens of funds to halt a stampede out of the sector, as investors look to shift their money into bank deposits recently guaranteed by the government in response to the global credit crisis.
The mortgage funds fear that if they continue to meet the flood of withdrawals, they could all be forced to sell assets at depressed prices, risking outright liquidation and creating even more panic as remaining investors also head for the exits.
The Review, quoting unnamed market sources, said some form of liquidity support could be the answer, given the government has refused to extend its bank guarantee to market-linked funds.
'Some market sources also believe that some form of liquidity assistance to the mortgage funds could be the solution -- such as the government or Reserve Bank of Australia purchasing mortgage assets on repurchase agreements to give funds short-term liquidity, as now happens for bank securities,' the paper said.
On Monday, Colonial First State Global Asset Management, the country's largest fund manager which is owned by Commonwealth Bank of Australia, suspended withdrawals from its mortgage funds, which have assets of A$3.3 billion.
This latest freeze came as representatives of the funds management industry held crisis talks with Treasury officials on Monday. The talks are set to continue this week.
($1=1.636 Australian Dollar)
(Reporting by Mark Bendeich; Editing by James Thornhill) . ng COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
The A$30 billion mortgage-funds industry has frozen dozens of funds to halt a stampede out of the sector, as investors look to shift their money into bank deposits recently guaranteed by the government in response to the global credit crisis.
The mortgage funds fear that if they continue to meet the flood of withdrawals, they could all be forced to sell assets at depressed prices, risking outright liquidation and creating even more panic as remaining investors also head for the exits.
The Review, quoting unnamed market sources, said some form of liquidity support could be the answer, given the government has refused to extend its bank guarantee to market-linked funds.
'Some market sources also believe that some form of liquidity assistance to the mortgage funds could be the solution -- such as the government or Reserve Bank of Australia purchasing mortgage assets on repurchase agreements to give funds short-term liquidity, as now happens for bank securities,' the paper said.
On Monday, Colonial First State Global Asset Management, the country's largest fund manager which is owned by Commonwealth Bank of Australia, suspended withdrawals from its mortgage funds, which have assets of A$3.3 billion.
This latest freeze came as representatives of the funds management industry held crisis talks with Treasury officials on Monday. The talks are set to continue this week.
($1=1.636 Australian Dollar)
(Reporting by Mark Bendeich; Editing by James Thornhill) . ng COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.