“Investors should not be too pessimistic”
There are still opportunities for returns in the current economic environment, according to the Singapore investment manager of the French asset manager.
Head of Investments at Amundi Singapore, Joevin teo, gives his perspective on the risks and opportunities of Asian fixed income securities, in a discussion ahead of Fixed Income Leaders Summit Asia 2021.
Joevin Teo, how do you see the changing geopolitical landscape impacting the markets for the rest of the year?
First, investors should be vigilant as the continued spread of the delta variant around the world could lead to a potential deceleration in economic growth, although further lockdowns are unlikely given how governments have witnessed the devastating effects. on various economies.
In addition, there is likely to be some form of policy divergence among central banks. China seems to be moving towards an accommodating bias given its growth dynamics. This contrasts with the United States, which is experiencing higher inflation associated with a recovery in employment.
What should investors watch out for?
We believe that investors should not be too pessimistic and should be vigilant. In the short term, investors should be more cautious and seek hedging opportunities in the event of an unexpected economic downturn. We maintain a bias in favor of companies that will benefit from the reopening and those with resilient, undisturbed business models and strong balance sheets.
On bonds, we remain cautious about lengthening duration and see opportunities in credit spreads. As corporate earnings remain stable, valuations are starting to be strained; investors need to be even more selective.
What do you think of Chinese assets, given the increased activities of the state to regulate in various sectors?
There have in fact been recent regulatory changes in various sectors in China. Markets should watch for new developments. At the same time, China’s push towards self-sufficiency and the overall strength and dynamics of the market are expected to continue to provide new opportunities for investors.
In the longer term, Chinese assets will benefit from stable economic growth, its shift towards domestic consumption and the support of government policy.
How do you see the economic recovery unfolding in Asia and what opportunities are available?
Although there has been a resurgence of Covid cases and new restrictions in emerging Asian countries, the overall impact is unlikely to derail economic growth to the same degree as in 2020. The deployment of the vaccine in Asia continues to be uneven, but the overall trend is encouraging. Asian governments know how to moderate the fallout from the effects of the pandemic on economic growth; the likelihood of further full and absolute stops is likely to be lower.
We remain positive on all Asian fixed income securities, both hard currency and local currency. Asian EM hard currency credits continue to trade at a yield premium over comparable EM, US and Euro credits, providing investors with attractive value opportunities by taking on longer duration risk. low for higher yields. Within the Asian local currency space, Asian local currency bonds should continue to trade well. China is expected to benefit from inclusion in the index, while other higher yielding government bond markets are expected to benefit from improving external balances and favorable growth-inflation dynamics.
Is there still room for sustainability on the agenda?
Over time, investors are likely to place more emphasis on incorporating ESG into their investment decisions. The level of sophistication is likely to increase as investors look beyond the exclusion criteria and towards companies that show real progress towards ESG. Investors are also likely to take a more active approach to involving companies in their ESG frameworks.
- finews.asia is an official media partner of the Fixed Income Leaders Summit Asia, held September 29-30, 2021, SGT. Register now for jIn Joevin Teo’s session: “All-Star Panel: Risks and Opportunities in Asian Fixed Income – How to Navigate Today’s Environment to Overcome Low Interest Rates, Mitigate Risks, and Find Opportunities to Get the Returns You Get you need ? ”
Joevin Teo has experience in the global and Asian fixed income markets for fixed income, credit, foreign exchange and liquidity products. He has managed fixed income portfolios for private and public institutions. He was previously Head of Asian Fixed Income at Amundi Singapore, and before that at HSBC Global Asset Management in Hong Kong where he was a Portfolio Manager in the Asian Fixed Income team. He was previously Principal Broker with Bank of Tokyo Mitsubishi in Hong Kong and Portfolio Manager with Monetary Authority of Singapore Reserve Management Department.