a credits stand to benefit from a us more rising stars and ... · unsure about the global macro-...

On a scale of -2 (most negative) to 2 (most positive), we asked the most Astute Investors to rate their outlook for the

Asian G3 bond markets in the year ahead and the reasons behind their rating.

HONG KONG

Desmond How and Ran Li Nomura Global Capital ManagementOutlook: 2

The J.P. Morgan Asia Credit Index (JACI) returned -3% so far in 2013, on the back of a 130bp yield rise. The pre-mature sell-off in US treasuries has been the main culprit of bad performance as spreads only widened 35bp on the year. Asia’s best fundamentals may have passed us as sovereigns issue debt to refill coffers and the corporate sector releverages post Lehman. Still, the 1997 Asian currency crisis will not resurface as our current floating exchange rate regime absorbs and transmits shocks well today. Moreover,

More rising stars and fallen angels

AsiAn credits stAnd to benefit from A meAsured us fed tApering

Investors are cautious. They are unsure about the global macro-picture and about when and how quickly the US Federal Reserve will end its programme of quantitative easing. Signs of money outflows from emerging to developed market assets and of a global asset reallocation from fixed income into equity market are injecting volatility into the market

– by Asset benchmArk reseArch improving economic growth and higher demand for DM goods. Also, the improv-ing business environment bodes well for credit investment. As such, we expect Asian G3 bond credit spreads to compress over time.

SINGAPORE

Charles Ooi Tahan CapitalOutlook: 0

Valuations are becoming attrac tive but face headwinds from challenging tech-nicals, such as dealers’ thin balance sheets, heavy supply pipeline and the fact that the outflow trend from fixed income has yet to stabilize and turn around meaningfully. Markets will go through periods of exces-sive pessimism and optimism, requiring us to stay nimble and trade.

Ronie Ganguly PIMCOOutlook: 1

While valuations in Asian credit still look attractive overall, a greater focus on bottom-up analysis is going to be the key.

default rates look set to remain muted considering a prolonged low interest rates environment with abundant financ-ing options. The record-breaking bond issuance will be met by a bond redemp-tion hump into 2014. It is arguably a Goldilocks scenario albeit with higher volatility from market risk. Indeed, valu-ations appear more appealing now than a few quarters ago. People have been overpaying attention to tactical fund flows of late, and forget that dedicated inves-tors are here to stay since Asian bonds – as part of emerging market (EM) debt – have been elevated to mainstream asset class status. Subpar global growth coupled with sticky unemployment in the US and Europe will keep interest rates and equity valuations in check. The Great Rotation course – be it debt to equity or EM to developed market (DM) – just lacks meat.

Arthur Lau PineBridge InvestmentsOutlook: 1

We are positive about the Asian G3 bond markets in the year ahead as we believe Asia’s economies will benefit from

November 2013 43

Desmond HowNomura Global Capital Management

Arthur LauPineBridge Investments

Charles OoiTahan Capital

Ronie GangulyPIMCO

No unauthorized reproduction by any means.All rights reserved. Asset Publishing and Research Limited

Against a backdrop of recovering DM economies, slowing EM growth, a more leveraged balance sheet and a tightening rate environment, we are going to see credit differentiation.

In valuation terms, Asian investment-grade (IG) bonds, for instance, look attractive against DM peers, but there is little differentiation between struc-ture variations of credit at the moment. Similarly, high-yield (HY) markets are failing to recognize the refinancing risk in the 2015-2016 period and expecting the benign default environment – seen in last two to three years – to persist in the medium term.

Thus, while overall spread levels are attractive and the global investor alloca-tion to Asia is likely to rise, we expect more rising stars and fallen angels to appear over the next 12 months.

Arun Singhal Standard Chartered Bank Principal StrategiesOutlook: 1

I expect tighter financial conditions, increasing leverage and increasing supply to be a drag on Asian G3 credit. That is offset to a degree by structural demand for fixed-income products and relatively attractive valuations. Hence, I remain constructive about the Asian G3 bond markets in my base case.

CHINA

Larry Xin Fore Research & ManagementOutlook: 0

I am bearish in my outlook for the overall Asian credit markets on account of the deteriorating fundamentals: rising leverage, tightening borrowing condi-tions and the lack of free cash flow

generation. However the ample liquid-ity and benign DM growth outlook will limit any downside.

INDONESIA

Poniman Zheng Asuransi Jiwa Sequis LifeOutlook: -1

The diverging growth outlook for DM and Asian markets and the Fed taper-ing is likely to reduce the funds inflow into the Asian bond markets. However, the credit profiles of Asian countries are still better than those of the DM and should therefore somehow provide a degree of support to the markets.

Ezra Nazula Manulife Asset ManagementOutlook: 0

US economic data and actions taken by the Fed will continue to affect the Asian G3 bond markets. Even though Asian G3 bond yields have more or less priced in the possibility of a QE tapering and even though spreads to US treasuries are at yearly highs, volatility remains to be seen in Asian G3 bonds amid uncertain-ties over the global macro-picture.

Wiman Kastami BNP Paribas Investment Partners Outlook: 0

In the year ahead, I foresee political risks and a higher risk of a US tapering.

KOREA

Oh Chungkeun Industrial Bank of KoreaOutlook: 1

Supporting this positive outlook is the higher concession in terms of the

risk premium (credit spread) against the same-rated counterparts from Europe and the US.

The counterarguments are: (i) the supply overhang (and the need to be selec-tive and picky to choose the right one); (ii) the technical money outflow from EM assets into DM; and (iii) the global asset reallocation from fixed income to equity.

MALAYSIA

Esther Teo Hwang Investment ManagementOutlook: -1

It has been a challenging year for the Asian G3 bond markets since the Fed tapering talks in May 2013 caught the market by surprise. The sharp steepening of the US treasuries curve, coupled with the reversal of fund flows from EM to DM, caused Asian credit spreads to widen and bond prices to tumble. While the Fed has held back its decision to scale down its US$85 billion purchase of bonds in September, inevitably we still expect the Fed to start tapering in December 2013 or early 2014. Our base case is for the Fed to adopt Taper-lite as the US economic growth is still fragile. These uncertain-ties will continue to cause volatility in US treasuries and investors remain cautious. Meanwhile, issuers are rushing to the market before rates go higher.

We anticipate the credit spread to widen from here as new issuances will have to offer higher yield concessions to draw investors. Investors will be choosier in their credit selections based on valua-tions and technical factors.

After the large outflows in the last few months, we expect fund outflows to stabilize somewhat. Going into 2014, we still favour short duration.

Arun Singhal Standard Chartered Bank Principal Strategies

Larry Xin Fore Research & Management

Poniman ZhengAsuransi Jiwa Sequis Life

Ezra NazulaManulife Asset Management

Wiman KastamiBNP Paribas Investment Partners

44 November 2013 No unauthorized reproduction by any means.All rights reserved. Asset Publishing and Research Limited

November 2013 45

really changed over the past quarter but perceptions and risk appetites have, which have moved technical measures negative. Historically, credit spreads will tighten in an improving economic environment. However, recent negative fund flows have overwhelmed credit spreads to widen instead. We expect this historical relationship to return once the market stabilizes.

Our base case assumption is that yields on ten-year treasuries in 2014 will be around 3.25%-3.50%. We expect a lot of volatility in the market in the coming months, considering how data-dependent market behaviour is these days. In view of the extent and pace of the sell-off, we note that there are opportunities in the market of which we can take advantage, both in relative value as well as in an absolute sense.

Wong Schuen-Siang RHB Investment BankOutlook: -1

My negative view is based on four factors: (i) the fundamentals (the credit cycle) are turning more adverse with slowing growth and rising real rates; (ii) the prospect of a US (and global central bank) policy tightening in 2014 translates into risks for Asian countries with “weak” external positions; (iii) the potential for spread compression is constrained by supply; and (iv) valuations have become less attractive following the summer rally.

MIDDLE EAST & NORTH AFRICA

Mohit Bhatla Waha CapitalOutlook: 0

While the Asian markets have recovered partially from the summer

sell-off, we expect the next few months to remain challenging. The uncertain-ty around US interest rates coupled with the fundamental issues facing some of the major Asian economies (including India and Indonesia) will continue to present headwinds. The ever increasing supply pipeline will further cap the upside.

PHILIPPINES

Nadine Alapan Banco de OroOutlook: -1

The deferral of Fed’s tapering has eased financial conditions in Asia and triggered a knee-jerk rebound in EM risk assets. However, this does not change the trend of rising US treasur-ies yields nor solve structural concerns in EM.

There are still regional headwinds that include slower growth in China and growing current and fiscal deficits in India and Indonesia. Political uncer-tainties with the upcoming 2014 elec-tions in India and Indonesia are among the key issues in the region. On top of that, exogenous factors continue to dampen sentiment, including geopo-litical risks in the Middle East, politi-cal developments in Italy and political posturing in the US on the debt ceiling and shutdown issues.

These will continue to drive nega-tive headlines for Asia, but should not derail the long-term trend of credit compression when global growth picks up, particularly in the US.

In view of this, I intend to trade EM tactically from the long side to favour short-dated bonds on credits that are structurally stable.

Jason Wong Hong Leong BankOutlook: 0

Four negatives are somewhat miti-gated by two posi-tives. The negatives are (i) the collateral impact – other than just mark-to-mar-ket (MTM) impli-cations – of a delayed QE tapering and rising US treasuries yields; (ii) the impact on commodity prices of a slower-than-expected growth in China; (iii) the possibility that twin deficit issues may spread beyond India and Indonesia, considering that structural reforms will be slow and that the extent of policy tightening across Asia may hurt growth expectations; and (iv) Asian low beta IG names are getting expen-sive, offering a small 25-30bp pickup over similar rated peers in the US. The higher beta IG names and HY space would be challenging and more prone to a sell-off on the back of macro-vulnerabilities.

The positives are that (i) Asia’s foreign reserves are in a healthy state compared to 1997 and corporate and bank balance sheets are cleaner and less leveraged; and (ii) growth in the US/Europe will be slow, so monies will linger around Asia, but be less sticky than before.

Nik Zaki Abdullah CIMB-Principal Islamic Asset ManagementOutlook: 1

We are still bullish in Asian mar-kets/EM for the long term and with the US economic recovery under way, we believe any EM weakness will be short to medium term in nature. The boost to exports from stronger US growth should supplement slowdowns in China, which are hurting commodity export-ers in Asia. Inflation remains subdued in EM economies and most balance sheets are still in good shape to absorb a long transition toward more normal core market rates.

We believe fundamentals have not

Esther Teo Hwang Investment Management

Jason WongHong Leong Bank

Nik Zaki Abdullah CIMB-Principal Islamic Asset Management

Wong Schuen-Siang RHB Investment Bank

Oh Chungkeun Industrial Bank of Korea


b Top ranked for the past three years or longer

The most Astute Investors in Asian G3 denominated bonds in 2013HONG KONG Roll of Rank Name Company honour1 Desmond How Nomura Global Capital Management b

2 Madeline Foo BTG Pactual b

3 Richard Chun Claren Road Asset Management b

4 Ran Li Nomura Global Capital Management b

5 Arthur Lau PineBridge Investments b

= Desmond Chum Claren Road Asset Management b

7 Donald Ewer BTG Pactual b

8 Rob Stanley BFAM Partners 9 Job Campbell Income Partners 10 Andrew Seiz Pine River Capital Management b

11 Punit Patel Och-Ziff Capital Management 12 Alfred Mui HSBC Global Asset Management b

13 Ma Linlin Prudence Investment Management 14 Gregory Suen HSBC Global Asset Management b

15 Chad Liu Prudence Investment Management 16 Thomas Kwan Harvest Global Investments 17 Christine Cheung GaveKal Capital = Eric Liu Harvest Global Investments 19 Thomas Chan J.P. Morgan Private Bank 20 Stephen Chang J.P. Morgan Asset Management 21 Freddy Wong Fidelity Investment Management = Ivan Lee Serica Partners 23 Eric Lam BNP Paribas Wealth Management = Roger Wong Bank of China International 25 Kevin Wu BFAM Partners 26 Matthew Wong EVO Capital Management Asia 27 Andy Suen PineBridge Investments 28 James Wong BOCHK Asset Management 29 Edward Chan HSBC Private Bank = Alvin Ying BOC Group Life Assurance

SINGAPORE 1 Charles Ooi Tahan Capital b

2 Leong Wai-Hoong Nikko Asset Management b

3 Ronie Ganguly PIMCO 4 Arun Singhal Standard Chartered Bank Principal Strategies b5 Mark Thurgood Saka Capital b

6 Chia Tse-Chern UOB Asset Management 7 Angus Hui Schroder Investment Management b

8 Kon Chee-Keat Ashmore Investment Management 9 Tan Suanjin BlackRock 10 Sandeep Gupta Broadpeak Investments b

11 Chia Tse-Ern Tahan Capital b

12 Raymond Chia Schroder Investment Management b

13 Gopi Karunakaran Saka Capital 14 Assan Din Saka Capital b

15 Bryan Choo Tahan Capital b

= Ross Dilkes UBS Global Asset Management 17 Daniel Yu OCBC 18 Chng Oon-Jin Western Asset Management 19 Artur Piasecki BlackRock 20 Salman Niaz Goldman Sachs Asset Management 21 Mark Ong GIC b

22 Archana Parekh Seatown Holdings = Joyce Tan UOB Asset Management 24 Lian Chia-Liang Western Asset Management b

25 Nigel Foo First State Investments 26 Ashwin Aiyappan Saka Capital 27 Roland Mieth PIMCO 28 Tim Jagger Aviva Investors 29 Veronica Ng Lion Global Investors b

30 Amit Malik Standard Chartered Wealth Management = Hari Thirumalai Observatory Capital = Philippe Petit Pictet Asset Management = Joep Huntjens ING Investment Management

CHINA Roll of Rank Name Company honour1 Larry Xin Fore Research & Management

INDONESIA 1 Poniman Zheng Asuransi Jiwa Sequis Life 2 Ni Made Daryanti Allianz Life 3 Djumala Sutedja Eastspring Investments = Ezra Nazula Manulife Asset Management 5 Wiman Kastami BNP Paribas Investment Partners

KOREA 1 Lee Kyoungtaek Korea Investment Corporation 2 Oh Chungkeun Industrial Bank of Korea

MALAYSIA 1 Esther Teo Hwang Investment Management 2 Jason Wong Hong Leong Bank b

= Nik Zaki Abdullah CIMB-Principal Islamic Asset Management 4 Wong Schuen-Siang RHB Investment Bank

MIDDLE EAST & NORTH AFRICA 1 Mohit Bhatla Waha Capital

PHILIPPINES 1 Nadine Alapan Banco de Oro b

2 Voltaire Cabral Security Bank Corporation 3 Rustum H Corpuz Jr East West Bank b

4 Jerome J Lagustan RCBC = Alberto Pedrosa RCBC 6 Christina Escolar UnionBank of the Philippines b

7 Dondi Santillan Metrobank 8 Vikki Guevara Philippine National Bank 9 Analen Reyes Banco de Oro 10 Joy Charmaine Bank of the Philippine Islands Sahilan

UK/EUROPE 1 Alistair Ling GLG Partners Market Neutral Fund b

2 Richard Lange Stone Harbor Investment Partners = Edwin Gutierrez Aberdeen Asset Management 4 Raymond Sagayam Pictet Asset Management 5 Amy Kam GAM 6 Esther Chan Aberdeen Asset Management 7 Philipp Good Fisch Asset Management 8 Polina Kurdyavko BlueBay Asset Management b

9 Mehdi Mrad Natixis 10 Rav Singh J.P. Morgan Asset Management 11 Steve Cook PineBridge Investments 12 Alan Siow BlueBay Asset Management = Philip Meier Deutsche Asset & Wealth Management

US 1 Tieu-Bich Nguyen Wellington Management b

2 John Espinosa TIAA-CREF b

3 Lionel Jolivot Fore Research & Management 4 Johnny Mak Prudential Investment Management b

5 Lin Yuchen UBS Global Asset Management b

6 Javier Segovia TCW 7 Alex Stanojevic TCW b

8 Warren Mar Morgan Stanley Investment Management 9 Sean Hayes Wellington Management 10 Lisa Chin HSBC Global Asset Management b

11 Eric Chung Gracie Asset Management 12 LIEW Seng Mackay Shields 13 Arthur Hovsepian Payden & Rygel Investment Management= Daniel Shaykevich Vanguard= Sahil Tandon Morgan Stanley Asset Management

(capiTalizaTions denote surnames)


November 2013 47

Voltaire Cabral Security Bank CorporationOutlook: 0

I am neutral on Asian G3 bonds as the Fed is expected to end quantitative easing next year and some EM econo-mies are showing weak fundamentals. However, most of the reactions – espe-cially in the end of the Fed’s QE – have been largely priced in. It would be crucial for some Asian economies to be proactive in addressing low growth-high inflation coupled with fiscal defi-cits. Differentiation across sovereigns and credits on the basis of fundamentals should drive relative performance in EM portfolios in the year ahead.

Alberto Pedrosa RCBCOutlook: -1

We expect risk free rates to drift somewhat lower over the balance of 2014 and spreads on Asian bonds to drift some-what wider from current levels. The taper-ing will likely come at a slow pace with the termination of QE as late as the last quarter of 2014. For Asian external debt, there is a risk of heightened volatility in both India and Indonesia next year due to elections, and the fact that both countries face ratings downgrade pressure. Asian corporates will find refinancing more chal-lenging next year, with higher than aver-age new-issue premiums likely. Country and corporate differentiation will be the key drivers of performance next year.

UK/EUROPE

Alistair Ling GLG Partners Market Neutral FundOutlook: -1

Three reasons. First, the non-taper September rally – while positive in the short term – arguably did more long-term harm than good to the EM Asian credit market. Had the Fed tapered, credit market sentiment would have certainly suffered, but the proximity to the fourth quarter would have facilitated a capitula-

tive repricing as well as position-clearing. While painful, this would have set up market participants with a clean sheet and attractive valuations to begin 2014.

As it stands instead, the market has partially clawed back some of the extreme losses of June and August 2013 but now runs the real risk of re-living these losses – and more – as we face the prospect of a future taper. Second, the current market environment is not conducive to long-term thematic trades. This means that conviction-style positioning cannot be sustained and instead participants have to contend with choppy, bipolar market action by constantly adjusting their port-folio to achieve a dynamic neutral stance. Third, the macro-reaction by most Asian authorities to the August confidence scare has been to improve current account bal-ances by restraining monetary growth and domestic consumption. This will present a negative drag on earnings which – in the grand scheme of things – is prob-ably a necessary evil, but this will not improve corporate credit quality. All in all, this challenging environment will probably persist until valuations dete-riorate to the point where they become indisputably cheap.

Richard Lange Stone Harbor Investment PartnersOutlook: 0

Stone Harbor is overall neutral on the Asia G3 corporate bond markets. The strong technical support provided so far by Asian investors is balanced with the risk of further new issues and an overall pricing context that looks, if not overly expensive, at least fully priced when com-pared to other EM regions, in particular Latin America.

Also, we think the rising rate envi-ronment may erode demand from Asian

investors for the tightest IG issues and see better opportunities for good returns in the BB space.

Edwin Gutierrez Aberdeen Asset ManagementOutlook: 1

EM debt has never had two con-secutive negative years. In fact, the sell-off we just experienced from May through August was as long as any that we have experienced in the asset class. You have to go all the way back to the beginning of 1994 to find a comparably long sell-off, which was when Volcker surprised the market by hiking rates. When Fed hikes come this time around, that will hardly be a surprise as it has been well telegraphed. So we have priced in a lot of bad news on the US treasuries front.

This is an unusual sell-off in that when the rally in EM debt ends, it usually ends in crisis. Bond prices go down hard and fast and then rebound. There is no crisis this time so it’s much more slow-burn and unwind from expensive levels – which has made it more difficult to find equilibrium this time around. The dan-ger here is ironically the Fed’s failure to taper. For the past few months we have had a healthy clean-out of positioning and a reset of valuations in the asset class.

The Fed’s delay in starting to bring an end to its QE risks that short-term investors get sucked back in to earn a quick buck. That delays the necessary position clean-out and reset of valuations to new equilibrium levels.

This doesn’t change the fact that overall I remain positive about the asset class for 2014. I just wanted this adjust-ment process to largely be done by 2013. The Fed’s inaction could push part of that needed adjustment into the begin-ning of 2014.

Mohit Bhatla Waha Capital

Nadine Alapan Banco de Oro

Alistair Ling GLG Partners Market Neutral Fund

Voltaire Cabral Security Bank Corporation

Richard Lange Stone Harbor Investment Partners


Raymond Sagayam Pictet Asset ManagementOutlook: -1

I am significantly more cautious on Asian credit than I have been for a while. There are far too many aspects which could disappoint, although the timing is uncertain. Indonesia and India continue to display external vulnerabil-ity. Whilst northern Asian credit has outperformed southern Asian credit – as exemplified by Korean and Chinese IG performance to date – I don’t think enough attention has been paid to ris-ing private sector indebtedness. The YTD weakness of the yen is still taking time to work through the system and can take a toll on the more export-ori-entated economies. While Indian credit has stabilized of late, concerns about sovereign/banking rating pressures are justified.

I feel that another focal point of inves-tors in the upcoming months could well be questions regarding Chinese growth and concerns about the nature of shadow banking – even though such questions have subsided of late. When all this is con-sidered, Asian credit exhibits, potentially, more vulnerabil-ity than other EM regions.

High quality BBB/A Latin-American credits (excluding Brazil where it is right to be cautious) offer similar spreads and are more immunized from these issues. We haven’t witnessed significant institutional sell-ing of credit risk in Asia nor a leveraged private banking unwind yet. If this were to materialize, the downside

volatility and gap risk in cash bonds would be acute.

In short, I see a better risk reward in other EM regions (such as Latin America) and better technicals in DM credit (such as Europe which is experiencing negative net new issue supply, unlike Asia).

Amy Kam GAMOutlook: 0

Three factors: (i) the connection between US taper-

ing and rates volatility: a tapering delay suggest a near-term stability, and if no tapering occurs in October, stability may last longer;

(ii) I am cautiously optimistic that the new Chinese government can make progress on reform while maintaining a decent level of growth so as to avoid a hard landing; and

(iii) the macro-backdrop of concerns about India and Indonesia. The Indian government seems still far away from doing what’s needed.

US

Tieu-Bich Nguyen Wellington ManagementOutlook: 1

Driven by stronger global growth and policy flexibility, Asia is one area which will enjoy better growth prospects. These factors underpin stable credit fundamentals although we recognize that certain countries with structural imbalances will face challenging conditions. The removal of liquidity and loose monetary poli-cies have in general exposed macro-economic imbalances in EM econo-mies which, we find, are more limited in Asia.

We view the adoption of struc-tural reforms in China as a positive long-term driver for balanced growth for the region, although the path will not be smooth. In addition, several countries in Asia – including Korea, Malaysia and Taiwan – will benefit from the rebound in global manufac-

turing and trade. Offsetting these con-

structive trends are clear trends of credit tightening and large funding needs that reinforce the need to focus on fundamentally strong credits over valuations.

John Espinosa TIAA-CREFOutlook: -1

Driving our outlook for the Asia G3 bond mar-kets is a less constructive macro-view of China, and the remaining overhang of the Fed tapering pressuring

Most Astute Investors – Outlook for the Asian G3 bond markets in the year ahead (by region)

87 of the most astute investors from this year’s ranking provided their outlooksource: The asset asian G3 Bonds Benchmark Review 2013

Tieu-Bich Nguyen Wellington Management

John Espinosa TIAA-CREF

Johnny Mak Prudential Investment Management

Edwin Gutierrez Aberdeen Asset Management

Raymond Sagayam Pictet Asset Management

Amy Kam GAM


The Top Investment Houses in Asian G3 Bonds 2013 and their Astute Investors

Institution Nominated individuals

1. nomura Global capital Management Desmond How, nicholas zhang, Ran li (all HK)

2. saka capital ashwin aiyappan, assan Din, Gopi Karunakaran, Mark Thurgood (all sG)

3. Tahan capital Bryan choo, charles ooi, chia Tse-Ern, ng Yong-ngee (all sG)

4. claren Road asset Management Desmond chum, Kasemsak ‘Joe’ charoensiddhi, Richard chun (all HK)

5. BTG pactual Donald Ewer, Madeline Foo (all HK)

6. BlackRockartur piasecki (sG), Dan Gelfand (Us), Daniel Ruiz (Us), lee Dongchan (sG), Joel Kim (sG), neeraj seth (sG), Tan suanjin (sG), sumit Bhandari (sG)

= schroder investment Managementang chow-Yang (sG), angus Hui (HK), Julia Ho (sG), luke chua (sG), ng peng-Fong (HK), Rajeev De Mello (sG), Raymond chia (sG), Richard Brown (sG), souf.at Hartawan (iD), steve Kong (sG)

8. nikko asset Management ivy Thung, Ken Hirose, Koh liang-choon, leong Wai-Hoong (all sG)

9. HsBc Global asset Managementalfred Mui (HK), Gregory suen (HK), Fung Honyu (HK), James Veneau (HK), Jason pang (HK), Jennifer chang (HK), lisa chin (Us), Yeoh seok-poh (HK), Wilson Yip (HK)

10. pineBridge investmentsandy suen (HK), annie leung (HK), arthur lau (HK), chris perryman (UK), Mark lo (HK), steve cook (UK)

November 2013 49

yields of US treasuries. As China is one of the largest issuers

in the region, macro-weakness could negatively affect returns. Indirectly, the prospect of deleveraging and slower growth in China could weigh on the Asian G3 bond markets due to the region’s growing trade and financial links to the country.

The prospect of monetary normali-zation by the Fed could serve as a drag on total returns, even if credit spreads tighten. In addition, we believe that the credit cycle across the region has likely peaked with recent signals of slower

growth, higher interest rates, and grow-ing current account imbalances by vari-ous countries in the region pointing to this scenario.

We can see greater pressure on asset quality for banks, along with ris-ing leverage and weaker liquidity for corporates serving as a weaker funda-mental backdrop for the market. With weaker fundamentals and pressure on capital appreciation from the prospect of higher rates, credit selection, carry, and duration management should prove key to generating outperformance in the year ahead.

Johnny Mak Prudential Investment ManagementOutlook: 1

We are positive about Asian G3 credit. While it has outperformed EM during the Fed “taper-led” summer sell-off, a lot of value has been created in selected high qual-ity credits. We are of the view that while a Fed tapering may be inevitable, it will be at a measured pace, which will be positive for EM and Asia credits. China growth is one of the major concerns for 2014 and while guidance is still for 7%+ growth, we fear the market has not priced in the potential for it to fall below the target.

Can Aristotle’s wisdom be applied to investment management? Is the

whole greater than the sum of its con-stituent parts? We analyzed the 2013 nominees of the Astute Investors in Asian G3 Bonds award to see which institutions featured the most prom-inently. This year we announce the Top Investment Houses in Asian G3 Bonds. This new award is based on the number of votes that Astute Investors have received.

Nomura Global Capital Manage-ment was ranked first with three nomi-nated individuals: Desmond How, Ran Li and Nicholas Zhang. One reason for Nomura’s triumph is that How was the top-scoring Astute Investor overall for the 5th year running and Ran Li was ranked 4th in Hong Kong. Two hedge funds based in Singapore were runners up: Saka Capital was ranked in second place and Tahan Capital third. Both institutions shared an equal number (four) of Astute Investors; all from Saka Capital and three from Tahan Capital were ranked in the top 30.

Methodology: The ranking is generated according to the number of votes, received from the top-rated analysts, economist & credit strategists, salespeople and traders, for investors in these institutions. More than 400 investors from 200 institutions were involved: 40% are Asian asset managers, 30% interna-tional asset managers, 21% private banks and 9% are hedge funds.

The ten investment houses garnering the most votes

note: numbers in brackets indicate how many astute investors in the institution were nominated in 2013 source: The asset asian G3 Bonds Benchmark Review 2013

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a credits stand to benefit from a us more rising stars and ... · unsure about the global macro-...

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