UPDATE: Pimco Reducing Emerging-Market Exposure Over Short Term

-- Pimco is cutting exposure to emerging markets over the short term, its Asia CEO says
-- The Chinese yuan may appreciate slower, trade in a wider range ahead, he adds
-- Some market participants voice concerns about investing in Indonesia


(Updates to wrap together several earlier items.)


SINGAPORE (Dow Jones)--Pacific Investment Management Co. is reducing exposure to emerging markets over the short term, due to concerns about "material" risks to the outlook in 2012, an official at the investment management firm said in an interview.

At a conference in Singapore Tuesday, Pimco Asia Chief Executive Officer Brian Baker also said that the Chinese yuan may appreciate at a slower pace and trade in a wider range ahead.

Some other participants at the forum additionally expressed more cautious views about investing in Indonesia.

Pimco's Baker cited several key risks in 2012: a default in Europe or break-up of the euro zone; geopolitical issues, such as the Arab Spring; the possibility of a hard landing in China; and the risk of developed-world central banks losing credibility.

"We as a firm, because of our concerns about the potential volatility that we see in 2012... are derisking our portfolios, which would include reducing our emerging-market exposures over the short term," Baker said in an interview on the sidelines of Euromoney's Asia Forex Forum.

Baker also said that the world's largest bond investor didn't see any asset bubbles right now, and that market prices reflected economic or policy factors, rather than rational ones.

Gold prices are being driven by low real yields in government debt and its safe-haven role in investor portfolios, he said.

"With rates so low and people who have cash not earning much in bank deposits, commodities and gold are a store of value, and perhaps can be used as a better store of value than paper assets."

He added that Pimco was "constructive" on Australian bonds, but that the country's economy was slowing and that the Reserve Bank of Australia would likely cut interest rates further.

Some investors at the forum expressed caution on Indonesia, which was raised to investment grade by Fitch Ratings and Moody's Investors Service in December and January, respectively.

The country's central bank cut its benchmark policy rate by 25 basis points to 5.75% Feb. 9, drawing criticism from some economists, who questioned whether it was moving too quickly.

Joel Kim, head of Asia Pacific fixed income at Blackrock Inc. (BLK), said Bank Indonesia's recent actions raised questions about whether it is flirting with a return of inflation.

Indonesia is "a market we're a bit cautious about. We'd probably put our money in other markets right now," Kim said, adding that he sees more potential for growth in the medium-term in Korea, or possibly in Malaysia.

Peter Redward, principal at consultancy Redward Associates, echoed that sentiment.

"I was quite bullish on Indonesia at the start of this year. All of my analysis was that Indonesia should've performed as well as Malaysia and Singapore, and it just didn't," he said.