Sun, May 28, 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. Investing - Tudor Jones backs AI hedge funds, Massive hedge fund trades highlight insider buying: GE, Pentair, Tempur Sealy, Apollo Global and more, Hedge funds big wigs are buying consumer and selling tech, here's the stocks[more]

    Tudor Jones backs AI hedge funds From FT.com: Hedge fund magnate Paul Tudor Jones has invested in a brace of artificial-intelligence powered "quantitative" hedge funds, underscoring the increasing acceptance that the industry will need to turn more to technology and away from traditional

  2. Soon hedge fund investors won't bet on a man, they will bet on a machine[more]

    From Forexlive.com: The Wall Street Journal is in the midst of a 17-part series that looks at the rise of quant funds. The AUM and money invested in quant funds still trails traditional asset managers but the gap is closing. What's truly amazing is volume. Quant funds make up 27% of trading vo

  3. Investing - China's HNA wants to invest in Value Partners, Risk parity investors reap rewards from rebalancing act, SoftBank's $100 billion tech fund rankles VCs as valuations soar[more]

    China's HNA wants to invest in Value Partners From Reuters.com: HNA Group has alighted on a logical, if pricey, target in Hong Kong. The deal-hungry Chinese travel conglomerate known for overpaying wants to invest in Value Partners, one of Asia's few sizeable independent asset managers,

  4. Opalesque Exclusive: Investors warm to ESG, but seek standardization[more]

    Bailey McCann, Opalesque New York: Asset managers and asset owners plan to double their investment in Environmental, Social and Governance (ESG) driven strategies over the next two years, according to a survey from BNP Paribas Securities Services. The report, "Great Expectations: ESG - what's nex

  5. Opalesque Roundtable: France's hidden strengths in AI and machine learning[more]

    Komfie Manalo, Opalesque Asia: All nations offer their strengths and weaknesses, but one that is undisputed is the quality of the French scientists, claimed Guillaume Vidal, co-founder of French technology startup Walnut Algorithms at the