Asian bond market in credit cycle sweet spot, ably supported by fundamentals: AllianzGI
- Bond offerings by Chinese utilities and Macau gaming companies are particularly attractive because of their low default rates and reasonable yields
The outlook for Asia’s bond market in the second half of the year looks bright after these debt instruments outperformed their global peers in the first half, according to a report by Allianz Global Investors on Monday.
Bond offerings by Chinese utilities and Macau gaming companies are particularly attractive because of their low default rates and reasonable yields, the German fund manager said.
“Earnings reported by Asian [corporation] and financial institutions confirm our opinion that Asian credit is in a sweet spot of the credit cycle,” said Jenny Zeng, chief investment officer for Asia-Pacific fixed income at AllianzGI and one of the co-authors of the report.
“Importantly, the Asia high-yield default rate fell significantly to 9.1 per cent in the first half of 2024 after being in double digits since 2021. We expect the rating trajectory to remain stable and the default rate to normalise to the mid-single digit range.”
Investors are now searching for investment alternatives other than bank deposits as the market widely believes the US will start cutting its key rate as early as September.
