Market turbulence has produced attractive income opportunities in Asian corporate bonds against a still positive economic backdrop in the region.
We expect that the US dollar’s strength should fade in 2019 as the pace of US rate hikes begins to slow, which will ease the pressure on Asian bonds next year.
Valuations have become more attractive and fundamentals are reasonably positive. But a period of transition looms, with central bank support being withdrawn and government bonds now offering a more compelling alternative than they have in many years.
The storm clouds are gathering for fixed income investors who may soon have to leave behind the quiet life which they have become accustomed to since 2008.
As stock markets fell in October, bond yields rose – bucking a long term trend. This has significant implications for how investors look at diversification.