China’s bond market is beginning to look up as the country reopens and government rescue plan for the property sector kicks in. But the market will remain volatile compared with developed markets.
Tag : investment grade
Asian sovereigns and investment credit have become attractive again as the market moves towards the end of the rising rate cycle. But China's fixed income is still not one of such kind.
Arthur Lau, head of Asia ex-Japan fixed income, and Emily Lam, client portfolio manager, at PineBridge Investments, highlight the continued appeal of Asia investment grade (IG) as well as high yield (HY) bonds for their relatively stable and attractive source of yield and diversification.
The $20 billion Korean public pension fund will reduce fixed income exposure both at home and overseas to below 35% by the end of this year, and to below 31% by end-2025.
The Hong Kong-based insurer is looking to investment-grade bonds in the region as it seeks decently yielding debt that is unlikely to be downgraded into junk territory.
Regional asset owners have started jumping into newly issued and highly rated US corporate bonds as they look to take advantage of wider spreads, say fund experts.
Asian investment-grade bonds may be less at risk of downgrades to junk than those elsewhere, but asset owners – particularly insurers – are being advised to take precautions.
Even given the prospect of a 20-year wait for a step-up, investors are ready to take the credit risk in one Hong Kong-listed leasing company. It reflects strong appetite for yield.
Issuance in Formosa bonds has crashed following regulatory changes, but insurers still desperately need higher-yielding products to meet their obligations to policy holders.
The Taiwanese insurer is also keen on Formosa bonds and high-dividend stocks, but has zero US Treasuries and is waiting for yields to rise before it buys more foreign fixed income.
However, they say Asian bond markets in general are likely to weather the rising trade tensions with the US better than many expect.
The current indiscriminate hunt for yield could land some firms in hot water, as it has in the past, says Ian Brimecome, a senior executive at Tokio Marine.
