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As Asia’s economy gradually recovers, supported by monetary and fiscal stimulus, investors could consider tapping local currency bonds for competitive total return potential in an Asian bond portfolio.
1. An instrumental play
Asia’s bond markets have grown significantly over the past decade, where growth of both USD and local currency bonds have increased multifold. Asian local currency bonds, with a market size of about US$16 trillion compared with US$1 trillion for Asian USD bonds1, could be an instrumental play in investment portfolios.
2. A diversifier
Asian USD bonds and Asian local currency bonds are exposed to different risk factors:
An Asian bond portfolio with both USD and local currency exposures could help diversify return potential and risk.
3. An active approach to help capture diverse opportunities
Asian local currency bonds offer diverse investment opportunities as they span more than 35 locations3, covering different fiscal policies and development plans. The currency movements of these locations are also driven by different factors.
Taking an active investment approach could help capture the fast-evolving USD and local currency bond opportunities. An experienced investment team, alongside an actively managed and flexible strategy could help capture the diverse opportunities emerging from currency trends, while mitigating portfolio risks.
How are we making the most of Asian local currency bond opportunities2?
Actively managed portfolio
Currency exposures and durations in our JPMorgan Asian Total Return Bond Fund are actively managed as we navigate the different market conditions. The Fund’s tactical FX hedging also allows for flexible adjustment in our Asian currency exposure, covering renminbi (RMB) and other higher-yielding4 currencies such as Indonesian rupiah (IDR), with a view to managing risks while seizing opportunities.
The Fund’s net Asian FX positioning (after hedging) year-to-date5
Other characteristics of the Fund:
A flexible Asian bond strategy
A robust Asian bond strategy would require the flexibility to exploit investment ideas across a wide range of opportunities available in the region. Without benchmark constraints, the Fund invests flexibly in fixed income sectors such as USD Asian credit, local currency bonds and convertibles, striving for competitive total returns.
Attractive income opportunities6
The Fund offers monthly distribution “(mth)” share classes*, providing attractive income opportunities. In addition, the Fund is available in USD and HKD Classes, alongside Hedged Classes in AUD, CAD, NZD, RMB and GBP, to help meet investors’ need for different currencies.
(*Aim at monthly distribution. Dividend rate is not guaranteed. Distributions may be paid from capital. Refer to important information 3)
Asia’s bond markets have grown significantly in recent years, where growth of both USD and local currency bonds have increased multifold. With an instrumental role in the regional markets, local currency bonds could supplement an exposure to USD bonds.
Active management of currency exposures could help capture the diverse opportunities in local currency bonds, while striving for better risk-adjusted returns amid current uncertain market conditions.