2Q 2021 bonds: where are the opportunities as inflation looms?
We explore the bond themes and opportunities for 2Q 2021 as inflation picks up.
CAPTURING THE VAST POTENTIAL ACROSS ASIAN BONDS
Over six months into 2020, geopolitical uncertainty and the public health crisis continue to dominate markets. Central banks and governments have responded with massive monetary and fiscal stimulus to support economies and help mitigate risks. Inflation is expected to remain benign in Asia, potentially giving policymakers more room for quantitative easing policies, which could be a boon for debt markets.
Investors’ search for yield has become tougher in the era of ultra-low, or zero interest rates. When compared with other regions around the globe, Asian bonds generally offer more attractive income potential. Meanwhile, investing in higher-yielding local currency debt may help enhance potential returns.
Various Asian bonds exhibit lower, or negative correlation to US Treasuries while offering compelling returns. Similarly, USD Asian IG bonds and local currency Asian bonds also show lower correlation to equities. Taking a diversified approach across Asian bond sectors could offer diversification^ benefits to the overall portfolio.
J.P. MORGAN ASSET MANAGEMENT'S ASIAN FIXED INCOME TEAM
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.
Actively managed portfolio
The Fund taps into a diverse set of sectors available in the region, seeking to optimise the unique benefits of each sector. The investment team actively manages currency positions and duration to navigate changing market conditions. The tactical foreign exchange hedging also allows for flexible adjustment in our Asian currency exposure, covering RMB and other higher-yielding currencies such as IDR, with a view to managing risks while seizing opportunities.
Attractive income opportunities
The Fund offers monthly distributing share classes*, providing attractive income opportunities. In addition, the Fund is available in USD and HKD Classes, alongside AUD Hedged, CAD Hedged, NZD Hedged, RMB Hedged and GBP Hedged Classes, 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)