Speaking on the sidelines of a conference in Bangkok, Tony Summers told Reuters that following a total withdrawal from Asian equities this year, National Mutual remained cautious on Asia due to currency concerns.

It was also concerned about how long the Hong Kong government would continue to hold stocks it has bought this year to help support the local stock market, he said.Summers said the Australian-based group was adopting a generally more cautious fund management policy due to volatility in world markets which may see it review a long term target of about 10 per cent return on its investments.

"In the current events we are obviously well below that because of what has happened in the markets and what we have been doing is determining what we can earn in the long term and we haven't finished that workyet," he added.Summers said the group's investment policy now sought to ensure a currency match between its assets and liabilities. With about 75 per cent of the firm's business conducted in US dollars the group was now weighted more towards the US bonds and cash."There is a period of economic uncertainty and during this period we would prefer to be a bit more cautious," he said."We are far more concerned that we are matching our assets and liabilities and perfectly matched in a currency sense, and we have done a lot of work in that sense," he said.

The group is most heavily involved in the region through its 69 per cent stake in listed Hong Kong unit National Mutual Asia Ltd, which has about HK$20 billion ($2.58 billion) under management.

The group also has units in Taiwan, Indonesia, Thailand, and Singapore.It left most regional equities after a market downturn in the second quarter of 1998, and had now completed a withdrawal from Hong Kong and Taiwanese stocks, he said.Despite a recent uptick inregional equity and money markets, Summers said he maintained a recent warning that National Mutual Asia's investment returns in its second half to September 30 would be hit by regional instability.

"Naturally the investment earnings of our National Mutual Asia business will be impacted in the second half as well."

Summers said that if Hong Kong dollar's peg to the US dollar remained until June next year a major source of Asian currency concern could be lifted. He stressed the core insurance business in Hong Kong remained promising.

"Whilst we have taken out a protection against a break in the Hong Kong dollar peg that has been prudent in our balance sheet management, the last thing we would like to see is a break in that peg," Summers said.