We live in an increasingly globalised world where Asia and, particularly, China play an ever-growing role. Nonetheless, the inaugural biannual Asian Bond Investor Survey sponsored by HSBC and S&P Global Ratings shows striking regional differences of investor opinion towards a number of issues affecting Asian debt markets.
During March, East & Partners (a FinanceAsia joint venture) conducted a series of telephone interviews with 151 of the world’s top chief investment officers and heads of fixed income. The fixed income assets under management at these funds average out at more than $3.7 billion.
The findings of the survey were introduced to investors at an event in Hong Kong on May 16. FinanceAsia has also created a microsite devoted to the survey, where you can read a full report on the findings and the latest news on the Asian debt market, as well as content from sponsors HSBC and S&P.
The survey found that an overwhelming 74.8% of respondents said they planned to increase their Asian exposure within the next 12 months. Only 6% of respondents planned to reduce their holdings.
“This ties in with what we see,” Alexi Chan, global co-head of debt capital markets at HSBC, said. “Asia’s debt capital markets have been making strong progress in recent years.
Other key findings include:
- Investors were not positive about the outlook for regional spreads. Most believed the spreads on Asian G3 sovereign and high-yield corporate debt would likely widen over corresponding risk free rates over the next 12-months.
- Respondents singled out property as the sector most likely to see defaults. Two-thirds expect real estate debt spreads to climb and 85.7% believe defaults generally are likely to emanate from China. However, respondents worried about the property sector are almost exclusively located outside of Asia (96.4%).
- The key economic concern for the largely Asian investor pool was rising political risk in Europe. This worried 55% of respondents, followed by volatile equity markets on 41.1% and falling commodity prices 36.4%.
Respondents also discussed the countries that are foremost in their minds for investment, their appetite for panda and masala bonds from China and India, and their attitude to bonds with an environmental, social and governance (ESG) focus. To read the full report, click here.
While the survey shows that investors can often have a markedly different view of the world depending on where they are based, their desire for wider and deeper knowledge appears to be a given.
“Historically trade and capital flows have been north-south, usually between developed and developing markets,” said Matt Bosrock, global head of developing markets at S&P Global Ratings. “But in the last decade, we’ve seen this transitioning to south-south. I was recently in Brazil and the number of questions I fielded about China was immense.”