Aberdeen Asia Pacific Income Fund (NYSEMKT:FAX) just reported on its holdings as of April 30. FAX is 43.7% invested in A$ bonds and 36.9% invested in US$ ones (but only 2.4% invested in US geographic risks because the US dollar borrowers were foreign.)
Its other currency exposure: South Korea 4.2% (but double that in geography); China 3.3% (but 6.9% in geography); Singapore (but only 2.3% by geography); Malaysia 2% (but 6% by geography); Thailand and Philippines 1.9% each by currency (but 5.2% and 7.8% respectively by geography; India 1.7% but 4.2% by geography); and bits in New Zealand, Britain, Indonesia, Sri Lanka, and Taiwan.
This fund appeals for its diversification, and for its strong Oz government and multilateral organization bond focus, and its high ratings.
At FAX, 35.4% of its holdings are AAA and another 34.7% AA or A.
This is not a mere Pacific Region emerging markets loan fund, but one with a strong historic base Down Under. It was founded by an Australians and only acquired later by Aberdeen (of Britain) and the Crocodile Dundee founder is still on its board.
FAX uses leverage to increase its return and it trades at a serious discount from net asset value, currently 7.5%, well above normal. I averaged down last week on the theory that Oz interest rates will not speed upward as fast as US ones when the Fed tightens or tapers or whatever.
Australia may call its currency the dollar but it is an independent country and more likely to need a bit of central bank ZIRP and QE if China really is slowing down as statistics seem to indicate, most recently from the World Bank.
FAX fell with all yield earners since the Fed began talking about renewed tightening.
I take a long-term view. I first started investing in FAX well before I began my Global-Investing.com newsletter, copying my late father. And in those days Australia bonds tracked not China but Japan equities. This may recur in the present Asian sell off too. I am happy to own a strong portfolio of Australian bonds which I can buy at 7.5% below net asset value for the long term.
Disclosure: I am long FAX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.