Despite the strong year-to-date outperformance of Asia HY, we continue to see a case for allocating to Asia HY within global fixed income portfolios, supported by low default rates and attractive yield pickup. Active management will be critical to navigating the Asia HY landscape and avoiding credits with downside risks.
Accordingly, we see active management plays a key role in optimizing and customizing the Asia HY exposure across countries, tenors and rating categories. In this vein, we perceive merit in an Asia bond strategy that flexibly allocates between IG and HY paper based on fundamentals and valuations, positioning it to capture potential credit risk premium in Asia credit markets and could deliver resilient income.
Investment risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
When investing in less developed countries, you should be prepared to accept significantly large fluctuations in value.
Investment in certain securities listed in China can involve significant regulatory constraints that may affect liquidity and/or investment performance.
