Fullerton Investment Views 1Q 2020 

We believe that risk assets can remain buoyant in 2020, as global growth stabilises and US-China trade tensions de-escalate.

Key Takeaways

  • The lagged effects from global central bank easing will continue to support liquidity, growth and risk assets, even in the event of lesser rate cuts in 2020.
  • Key risks to our positive outlook include rising geopolitical tensions in the Middle East, and weakening global growth, resulting from depressed manufacturing and trade.
  • Asia’s equity earnings should continue to improve in 2020. IT and Financials sectors are expected to lead the outperformance. 2020 is likely to be a key inflection point for Technology sector, with the roll out of 5G.
  • In the Asian local currency bonds space, India and Indonesia remain markets where real yields are attractive relative to history and curves are steep. Asian corporate credit spreads can narrow further as growth stabilises and earnings improve.

For a more in depth look at the market and risk asset fundamentals, read the full article here

  Yielding to Asian Bonds in 2020

The case for investors to make an allocation to Asian local currency bonds in their portfolios remains compelling, amidst the persistent phenomenon of negative yielding debt globally.

With interest rates in the developed world expected to stay low and the phenomenon of negative yielding debt not going away anytime soon, yield-seeking debt investors are turning their attention to regions such as Asia where fundamentals are stable, while still offering attractive yields.

Key Takeaways

  • The Asian local currency bond market is a high quality investment universe, with all nine key Asian sovereign issuers in the investment grade category.
  • Asia’s bond markets offer investors compelling nominal and real yields, against an environment of negative/low yielding debt globally.
  • Inflationary pressures remain manageable across most Asian countries, keeping real yields firmly in positive territory, allowing regional central banks some flexibility to ease.
  • Rising FX reserves provide sufficient ammunition for Asian central banks to support their currencies and moderate FX volatility during periods of capital outflows.
  • Looking ahead, duration gains will be more selective next year as compared to 2019, as the pace of interest rate easing slows.We favour selective high yielders in Asia where central banks have further room to ease.
  •  As global growth rebounds and the flight to quality premium in the US dollar fades, Asian currencies can also outperform.

Read the full article here.