Asian credit: where are the investment opportunities?
Post-Covid recovery in the Greater China region is presenting opportunities in the internet platforms, Macau gaming, airports and retail-oriented companies. We also see opportunities in Indian renewables and infrastructure.
Authors
Key drivers of Asian credit so far in 2023
Credit markets have been on a rollercoaster ride since the start of 2023. Just as we thought the rebound in credit markets had legs to run, global banking stresses in March erased all spread tightening year-to-date and led to a re-think of the US Federal Reserve’s rate hike trajectory. While Asian credit spreads have widened in line with global volatility, the region has held up strongly, up almost 3.5% on a year-to date basis.
Globally, there are a number of issues keeping fixed income investors on edge: US debt ceiling concerns, US Federal Reserve’s rate hike uncertainties and US bank stresses.
However, against a backdrop of slowing global growth, Asia stands out as a bright spot and is positioned strongly relative to the global economic cycle. The region is poised to contribute to majority of the global growth this year, driven by tailwinds from China’s reopening story and firm economic outlook for major economies such as India and Indonesia.
Where are we seeing the most interesting Asian credit opportunities?
Mainland China has shown to be well on track in its post-Covid recovery, with Q1 2023 GDP coming notably above consensus at 4.5% year on year, largely boosted by travel-related consumption. A supportive policy stance also caps further downside risk to the Chinese economy. These developments are likely to benefit several segments in the Greater China region, such as internet platforms, Macau gaming, airports and retail-oriented companies.
Separately, we see several interesting credit stories in Indian renewables and infrastructure. Overall healthy macroeconomic outlook and robust domestic demand, along with a stable regulatory environment, help create a benign backdrop for these issuers to operate. These developments should help anchor credit fundamentals especially within investment grade, and support the outperformance of quality credits in the region.
Apart from the aforementioned markets, high quality Hong Kong SAR and Korea issuers also present ample opportunities for credit selection.
For illustrative purposes only and does not constitute to any recommendations to invest in the above-mentioned security/sector/country.
Important Information
The contents of this document may not be reproduced or distributed in any manner without prior permission.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect nor is it to be construed as any solicitation and offering to buy or sell any investment products. The views and opinions contained herein are those of the author(s), and do not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The material is not intended to provide, and should not be relied on for investment advice or recommendation. Any security(ies) mentioned above is for illustrative purpose only, not a recommendation to invest or divest. Opinions stated are valid as of the date of this document and are subject to change without notice. Information herein and information from third party are believed to be reliable, but Schroder Investment Management (Hong Kong) Limited does not warrant its completeness or accuracy.
Investment involves risks. Past performance and any forecasts are not necessarily a guide to future or likely performance. You should remember that the value of investments can go down as well as up and is not guaranteed. You may not get back the full amount invested. Derivatives carry a high degree of risk. Exchange rate changes may cause the value of the overseas investments to rise or fall. If investment returns are not denominated in HKD/USD, US/HK dollar-based investors are exposed to exchange rate fluctuations. Please refer to the relevant offering document including the risk factors for further details.
This material has not been reviewed by the SFC. Issued by Schroder Investment Management (Hong Kong) Limited.
Authors
Topics