AOI analysis: High-grade bonds, Asian equities to draw asset owners for next 12 months
Asian asset owners prefer Asian equities over other regions’ equities, and favour investment grade bonds over other fixed income investments, according to a March survey by Asset Owner Insights (AOI), an AsianInvestor data intelligence platform.
The survey collected responses from 37 asset owners that manage a total of $3.18 trillion assets in the region. Currently, AOI covers more than 100 institutions with over 600 contacts from asset owners.
Nearly 60% of respondents said that they preferred Asian equities in the next six to 12 months, while 30% chose global equities. Comparatively only 3% expressed optimism for developed market equities (see chart below).
For fixed income, 70% of the asset owners said they preferred investment grade bonds while USD-denominated emerging market bonds received the least interest (see chart below).
International investment grade bonds are still in high demand despite their low yield and rich valuation, because some institutional investors, such as pension funds, or insurance companies, are only mandated to invest in investment grade bonds, Tai Hui, Asia chief market strategist at JP Morgan Asset Management told AsianInvestor.
Paul Sandhu, head of multi-assets, Asia Pacific at BNP Paribas Asset Management, believes USD emerging market debts may see some volatility but Asia emerging markets could still be attractive in the overall spectrum of bonds.
Sandhu added that investment grade fixed income is not a primary alpha-generating asset class at the moment. "For some of our investors that need income and duration, it becomes a must, but there are more efficient ways to get income such as structured products and private debt."
Chinese Ping An Insurance (Group) for example, as of December 31, 2020, held Rmb110 billion ($17 billion) worth of corporate bonds. All of the corporate bonds were rated AA and about 91% had AAA ratings from third party agencies.
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