Fri, Aug 29, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Opalesque Industry Update - Asia will continue to grow regardless of global economic conditions

Thursday, June 23, 2011
Asia will attract increased investor flows whether the global economic recovery begins firing on all cylinders or splutters to a temporary halt, according to Legg Mason Source subsidiary Western Asset Management, which manages $456bn of fixed income assets across the globe.

While markets remain concerned about the fragility of the global economic recovery amid heightened geopolitical risks, Julia Ho, a portfolio manager on the $627m Legg Mason Western Asset Asian Opportunities Fund, says the underlying fundamental story should remain positive, particularly for Asian bond, currency and credit markets.

“Asia is in a somewhat unique position of potentially win ning in both a positive and negative global scenario,” she says. “If the global economy begins firing on all cylinders, investors on the sidelines might start feeling the confidence to deploy more capital into Asia, and investors that are already in Asia will begin to allocate more heavily to riskier investments such as currencies and credit.

“If the economy experiences a misstep, investors will quickly retrench and a flight-to-quality will ensue, thereby benefiting government bonds. But we could also see investors redeploy capital into Asia as a diversifier to their own regions, simi lar to how we saw large flows from Europe over the past couple of years.”

A key risk to this constructive outlook, says Ho, is inflation expectations. While she believes policymakers in most Asian countries have done a “respectable” job of controlling inflation expectations despite strong growth and burgeoning com­modity and food prices, she says they must remain vigilant.

“A sharp increase in inflation expectations could be detrimental to bond and currency prices. With inflation pushing upward, we expect central banks to continue to deploy the many tools in their arsenals, including targeted measures, such as those taken in Singapore and China to cool the property markets, as well as broad policies such as increasing policy rates and allowing their currencies to strengthen.”

Against this backdrop, Ho says the Asia team at Western will remain tactical in its approach to interest rate management, continuing to favour an overall defensive duration posture, in which Western’s bond portfolios maintain underweight short-term rate positions in favour of long-term rates. The team also expects to maintain its overweight to appreciating currencies in the region. “We expect Asian currencies to benefit from several trends, including strong fundamentals, investor flows to Asia from lower-yielding markets, higher central bank rates and policymakers’ use of currencies as an inflation-fighting tool.”

Ho says the positive fundamental backdrop will also support the team’s preference for Asian corporate bonds.

Press Release
bc

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Study shows what resonates with investors: 'Unwavering', 'passionate' beats 'committed', 'dedicated' and more surprises[more]

    Komfie Manalo, Opalesque Asia: A new study by Pershing Square, a unit of BNY Mellon company, showed that an effective value proposition strengthens audience connections and fosters growth, yet many advisors have had little objective guidance in formulating such statements until now. In the

  2. Comment – Why you should avoid the hottest hedge fund hands, Swedroe attacks Hussman over risk management, relative value strategy[more]

    Why you should avoid the hottest hedge fund hands FromCNBC/Yahoo.com: Investors who don't have money with Pershing Square Capital Management are likely salivating at the hedge fund's industry-leading 26 percent return from January through July. But investing with Bill Ackman and other to

  3. AIMA makes 'the case for hedge funds'[more]

    Bailey McCann, Opalesque New York: The Alternative Investment Management Association (AIMA), the global hedge fund industry body,

  4. Managed futures' global diversification is important in next phase of economic recovery[more]

    Komfie Manalo, Opalesque Asia: The global diversification provided by managed futures may prove to be extremely valuable as the markets enter the next phase of the economic recovery, said Campbell & Company, a pioneer in absolute return invest

  5. Ex-UBS prop trader's hedge fund Manikay Partners eyes UK launch[more]

    From eFinancialnews.com: Manikay Partners, a $1.7 billion US multi-strategy hedge fund set up in 2008 by a proprietary trader from UBS with backing from Goldman Sachs, is planning to open in the UK. New York-based Manikay's move into Europe comes after Financial News revealed on Monday that Aurelius