Sat, Feb 25, 2017
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. Opalesque Exclusive: Swiss investors take fund seeding and acceleration into their own hands[more]

    Benedicte Gravrand, Opalesque Geneva: Banque Bonhote, a 200-year old Swiss private bank, last year launched a community of investors - heads of Swiss family and advisory offices and wealth managers - with the aim of co-investing in the kind of managers they wanted to invest in, either by way of s

  2. K2 Advisors : Why We Like Activist Hedge Fund Strategies and Some Thoughts on Alpha[more]

    Matthias Knab, Opalesque: Rob Christian, Senior Managing Director, Head of Research K2 Advisors, Franklin Templeton Solutions, writes on Harvest Exchange: When d

  3. Ex-Navy SEAL backed by Mario Gabelli, Jean-Marie Eveillard and other value giants off to strong start[more]

    From Valuewalk.com: Sententia Capital Management is not your average value focused hedge fund. The fund was founded by Michael Zapata, a former Navy Seal Team 6 Officer and has attracted funding from some of the best-known names in the value space. Mario Gabelli, Jean-Marie Eveillard from First Eagl

  4. Europe - 1 trillion euro non-performing loans are clogging EU lending channels[more]

    From Centralbanking.com: As much as 1 trillion euro of non-performing loans (NPLs) are still clogging the lending channel in the European Union. An EU asset management company (AMC) could address market failures in the secondary market for NPLs as part of a suite of measures designed to tackle the b

  5. Investing - Hedge funds' novel approach: investing for longer at lower returns, U.S. hedge fund Delta Partners lifts stake in Bellamy's, Hedge funds stockpile cobalt, electric carmakers on battery alert, Facebook is racking up the likes among the world's biggest hedge funds, Einhorn affirms gold on Trump uncertainty[more]

    Hedge funds' novel approach: investing for longer at lower returns From FNLondon.com: Hedge funds are known for making short-term bets, dipping quickly in and out of markets to take advantage of swings in prices. But, under pressure to innovate, some big-name managers are looking at ways