Alan Siow

The fast view

  • While China-related headlines created volatility in 2021, the broader asset class continued to benefit from its 'safe-haven' status and robust credit strength. We expect both of these phenomena to continue in 2022.
  • A key theme is likely to be China’s focus on balancing social stability and equality goals with economic growth. Careful analysis will be vital for investors to focus on companies with business models that fit with China’s vision for the future.
  • An increasing focus on ESG (environmental, social and governance), specifically climate risks as the world transitions to net zero, will be another key theme that presents risks and opportunities across the region.
  • A more diverse growth, inflation and monetary policy outlook across Asia creates an even richer hunting ground for active investors in this already diverse investment universe.
QHow big a concern is contagion from volatility in China?

This year has certainly seen significant volatility in the asset class, with much of this stemming from China’s offshore credit market.

That said, the fall-out from negative headlines around a handful of companies in China’s property sector has been relatively contained – mainly impacting the broader real estate sector in China, particularly high-yield bond issuers.

As for the rest of the Asia credit universe, this has largely carried on as normal. While some spill-over from China-related concerns did open up pockets of opportunity elsewhere in the investment universe during 2021, these soon disappeared as investors sought the 'safe haven' of this predominantly investment-grade market with its relatively robust credit strength.

Despite the volatility seen in 2021, we expect investor interest in Asian credit to continue to rise. The region remains home to the fastest growing middle class in the world, which helps to underpin the resilient fundamental strength of Asian corporates and their relative attractiveness within the fixed income landscape.

QWhat are the implications of the policy shift in China?

China – like many of its emerging market (EM) peers – is on the threshold of political change, and this is likely to see volatility continuing in 2022.

Ahead of the 20th Party Congress in 2022, we expect to see a significant focus on the key policy platforms shaping the country’s future. The key theme likely to emerge from this will be common prosperity, which is China’s approach towards how to grow its economy while maintaining social stability and reducing social inequality.

Investors will need to consider carefully the implications of this focus, both across and within sectors. A deep understanding of Chinese companies will be vital for investors to seek out those that are likely to be aligned with China’s broad common prosperity goal and to limit exposure to those that are at significant risk from a regulation perspective. It’s all about understanding which companies have sustainable business models that fit with China’s vision for the future.

While we are adopting a more cautious approach to China’s property sector as a whole - since regulation relating to that remains in a state of flux - within that we still see some bond issuers whose strategy and approach are aligned and consistent with the Communist Party’s broad goals, giving us conviction in these attractively valued names.

QWhich other risks and opportunities will you be focusing on?

An increasing focus on ESG globally, specifically climate risks as the world transitions to net zero, will be a key theme for us in 2022.

We see interesting opportunities in the renewable energy space in India, Indonesia and other regional economies as they transition away from a reliance on fossil fuel generation. We also see attractive opportunities within the green building and infrastructure sectors.

QHow relevant are global inflation risks to investors in Asia credit?

Concerns around inflation, and the direction of monetary policy – which has played such a key role in helping economies recover from the pandemic – are a global phenomenon. But within Asia we are seeing more dispersion in the growth and inflation backdrop and outlook than in other regions. In some countries in Asia, the tolerance of COVID-19 outbreaks has been very low, resulting in economies being locked down for longer and slowing the rate at which growth recovers.

The pandemic has certainly increased dispersion in the various EM debt asset classes and Asia credit is no exception. This is creating an even richer hunting ground for active investors.


Alan Siow











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