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Asian bonds come of age

Rachael Micallef  |  05 Feb 2013Text size  Decrease  Increase  |  

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Rachael Micallef is a journalist with InvestorDaily, a Sterling publication.

 

Asian fixed income has "come of age" as an asset class, now representing a major plank in long-term investment strategies, according to Threadneedle Investments.

In the past, Asian bonds have been part of a chase for yield, but investors have now begun to think of the sector as a part of their long-term portfolio structure, Threadneedle said.

"I think Asian bonds have 'come of age' - we are no longer saying that this is a very new asset class, because over the past 13 years the market generally has increased," Threadneedle Investments head of Asian fixed income, Clifford Lau, told InvestorDaily.

"This asset class has been becoming more mature and I think investors are taking it more as a long-term strategic allocation, which adds to the positive outlook for Asian bond trading in 2013."

Last year, Asian bonds saw their highest level of issuances within a single year, resulting in the sector recording a much higher core portfolio allocation by international investors, according to Threadneedle research released in January.

While low cash rates have meant investors have begun to look towards equity investments rather than fixed income, Lau said the popularity of the Asian bond market is likely to continue as an alternative, long-term option.

"As we all understand, the interest rate has continued to stay in a very low environment and that creates a situation for Asian corporates and banks - and even sovereigns - to come to the market and take advantage of [that] environment," Lau said.

"So, I believe the very active new issue of primary market activity will continue to drive the day-to-day trading flows.

"Meanwhile, I believe that both institutional and retail investors will continue to make an effort to look into Asian bonds as an alternative asset class into which to reallocate their assets."