A multi-income journey into the emerging high-yield potential
Income investors like us have stayed the course as we ride through the four seasons. Where do we see income opportunities?
Even though assets such as equities and gold have been reporting positive growth2 over the past few months, the old saying, “don’t put all your eggs in one basket”, still holds true. In volatile markets, investors can consider diversifying3 into bonds, based on their investment objectives and risk appetite.
The Asian bond market offers a diversified3 suite of opportunities. Among the potential options, we hold a constructive view on the outlook of the Chinese property market. And we believe Chinese property bonds1 offer three compelling factors:
1. An upturn in Chinese economic activities
Caixin/Markit PMI4 data
4. Source: J.P. Morgan Asset Management, Caixin/Markit, J.P Morgan Economic Research. PMIs are relative to 50, which indicates deceleration (below 50) or acceleration (above 50) of the sector. Data reflect most recently available as of 31.08.2020. Past performance is not a reliable indicator of current or future results. Provided for information only to illustrate general market trends.
2. Emerging opportunities in Chinese property bonds
YoY change in monthly sales of China’s top 100 property developers (January – August 2020) 5
5. Source: CRIC Property Research. Data as of 31.08.2020. Past performance is not a reliable indicator of current or future results. Provided for information only to illustrate general market trends.
3. Potential leaders from industry consolidation1
How are we optimising Chinese property bond opportunities1?
JPMorgan Asian Total Return Bond Fund adopts a flexible approach to optimise investment ideas across a wide range of opportunities. Without benchmark constraints, the Fund invests flexibly in bonds covering different industries, locations and currencies, striving for competitive total returns.
Over 40% of the Fund’s bond holdings covered Chinese issuers, as of end-July 2020, including a number of Chinese property bonds to capture compelling opportunities in the market.
Market breakdown6
6. Source: J.P. Morgan Asset Managment. Data as of 31.07.2020. Holdings, exposures and allocations for actively managed portfolios are subject to change from time to time. These represents Global Fixed Income, Currency & Commodities team’s views under current market conditions, subject to change from time to time. Provided for information only, not to be construed as investment advice. Diversification does not guarantee investment return and does not eliminate the risk of loss.
Conclusion
Expanding economic activities and the growing momentum of property sales in China are supportive of bonds issued by Chinese developers. Investors, based on their investment objectives and risk appetite, could consider a diversified3 approach to tap the income potential of an Asian bond portfolio, and help capture attractive total returns.
1. For illustrative purposes only based on current market conditions, subject to change from time to time. Not all investments are suitable for all investors. Exact allocation of portfolio depends on each individual’s circumstance and market conditions.
2. Source: Bloomberg L.P., MSCI. Data as of 31.08.2020. In the three-month period as of 31.08.2020, gold spot price recorded an increase of around 14% while the MSCI World Index rose about 15%.
3. Diversification does not guarantee investment return and does not eliminate the risk of loss.
Provided for information only based on market conditions as of date of publication, not to be construed as investment recommendation or advice. Forecasts/ estimates may or may not come to pass.
Investment involves risk. Not all investments are suitable for all investors. Past performance is not a reliable indicator of current and future results. Please refer to the offering document(s) for details, including the risk factors. Investors should consult professional advice before investing. Investments are not similar to or comparable with fixed deposits. The opinions and views expressed here are as of the date of this publication, which are subject to change and are not to be taken as or construed as investment advice. Estimates, assumptions and projections are provided for information only and may or may not come to pass. This document has not been reviewed by the SFC. Issued by JPMorgan Funds (Asia) Limited.