Asian fixed income: an antidote to global slowdown?

5 mins read

We recently came across an insightful piece by @Allianz Global Investors on how investing in Asian fixed income and credit could be an antidote to global slowdown and broader market volatility.


Traditionally, global investors have invested in Asian fixed income through emerging markets (EM) indices but with the high growth economies and the current position of the macroeconomic cycle, this approach needs to change. Direct investments in Asian corporate bonds can offer investors a much broader and a more diversified exposure to Asian issuers than popular EM bond indices.


Asia’s growth has been mirrored by its bond markets. For instance, the JP Morgan Asia Credit Index (JACI) has now reached a USD 1 trillion market capitalisation, representing bonds from over 500 issuers, with an average rating of single A.


Even with the exclusion of China, the world’s second-largest economy, Asia provides a relatively larger and more diversified investment opportunity. Asia features a unique combination of developed and emerging markets, which boasts AAA and AA ratings, the highest two notches on the credit rating scale. The region’s strong growth has also helped many other countries improve their sovereign credit ratings. Additionally, Asia still remains a largely untapped market with a demonstrated superior risk-adjusted return and better resilience versus other developed and emerging markets through better quality credits along with greater resilience to global market volatility.


Overall, given the global macro projections over the next few months, we believe that Asian fixed income and credit provides an attractive opportunity for global investors especially as a means to earn attractive risk adjusted returns along with regional and sectoral diversity.


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