fixed income strategyfixed income asset allocation * – n + fixed income developed dm govt dm...

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Fixed income Asset Allocation *

– n +

Fixed income

DevelopeD

dm Govt

dm credit

eMeRGING

em Govt

em corp

em lc

duration

yield curve*

Asia

latin America

cis/ee

middle east/Africa

GLOBAL FIXED INCOME

Notes:‘-‘ denotes maximum underweight, ‘N’ denotes neutral, ‘+’ denotes maximum overweight. Arrows show change from last quarter* 3-6 month horizon# ‘+’ denotes Steepener and ‘-’ denotes Flattener

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In the developed markets, we remain underweight on government debt and maintain a slight underweight on investment grade corporate credits due to the potential steepening of the US Treasury (UST) yield curve, while keeping durations relatively short to the benchmark. In the emerging markets (EM), we maintain a neutral weight, but

we are slightly underweight on EM sovereign and neutral on corporate credits. We are slightly underweight on EM Local Currency bonds. In Asia, we are overweight on corporate credits while we maintain a neutral position in Latin America and Middle East/Africa corporates. We maintain a slight underweight position on Central and Eastern Europe debts.

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32 QUARTERLY INVESTMENT STRATEGYFourth Quarter 2014

Please refer to the last page for the important notice & disclaimer.

united statesFollowing the disappointment in the first quarter of 2014, US growth has surprised the markets on the upside with the preliminary reading for the second quarter GDP coming in at four per cent. In addition, the growth for the previous three quarters was revised upwards by an average of 0.7 per cent per quarter. Despite these better-than-expected growth numbers, the UST yields have been range-bound at the lower end of the range. A combination of factors has led to the outperformance of the UST. These include muted inflation in the US, continued dovish forward guidance from the US Federal Reserve (Fed), geopolitical risks, the European Central Bank’s (ECB’s) accommodative stance and the Fed’s exit strategy which maintains the size of its balance sheet. The recent Consumer Price Index (CPI) reports have shown a slowdown in core inflation, following acceleration earlier this year. Wage inflation has not picked up yet as most of the job growth has come from low-paying jobs (service sector) and part-time jobs. However, with the Fed acknowledging the better-than-expected pickup in the labour market, low wage inflation should not be the only factor holding up the rate increases next year.

Though a few Fed members have turned to a slightly more hawkish stance due to better labour markets, the Fed Chair Janet Yellen has maintained her focus on the long-term slack in the labour market. The last Federal Open Market Committee (FOMC) minutes were slightly more hawkish than expected, where the committee agreed generally that employment and inflation have moved closer to their mandated goals and the recent progress has been faster than the Fed members’ anticipation. Yellen also presented a more balanced picture at her Jackson Hole speech, mentioning that the Fed is moving closer to normalising policy, assuming economic data continues to improve.

In terms of the Fed’s exit strategy, the members are still in the process of drafting a new strategy, which should be announced in the September meeting. In contrast to the June 2011 exit principles, the Fed members have indicated

that ending reinvestments prior to rate increases this time would be unlikely. We expect the Fed to stop reinvestments only six to eight months into the interest rate increase cycle. Markets are expecting the Fed to naturally run-off the balance sheet in due course without selling the assets in the market.

DEVELOPED MARkET FIXED INCOME

temporary / rearranges liabilities*

overnight term

un-collateralised / traditional counterparties

Interest on excess reserves

(IOER)

Term deposit facility (TDF)

collateralised / expanded counterparties

Traditional reverse repo

(RRP) / fixed-rate full-allotment

RRP

Term RRP

Permanent / reduces overall size of balance sheet

Passive Active

Balance sheet policy

Maturity / prepayment of

portfolio holdings without

reinvestment

Open market sales of portfolio

holdings

the Fed’s menu of exit options

*With the exception of IOER.Source: Goldman Sachs Research, “US Daily: Fed Exit 28 May 2014”

For the UST yield curve, we believe that the flattening is overdone at the current levels and the curve should steepen from here as the market acknowledges the better growth. Also as technical factors fade, the five-year and ten-year Treasuries should normalise to 1.70 to1.85 per cent and 2.65 to 2.85 per cent respectively in the coming quarter. In terms of currency, we maintain our overweight position in USD as we foresee that a continued pick-up in growth will support the greenback.

33QUARTERLY INVESTMENT STRATEGYFourth Quarter 2014

UOB Asset Management

eurozoneIn the Eurozone, the ECB has acknowledged the slack in the economy by cutting rates and announcing stimulus to combat low inflation. This also highlights the increasingly divergent paths among the world’s central banks. After highlighting the falling inflation in the last meeting, the ECB President Mario Draghi announced the buying of financial assets excluding any government debt. This stimulus falls short of QE, which has been undertaken by the US and United kingdom. The markets were expecting an accommodative stance by the ECB as the comments in the previous meeting highlighted the fall in the five-year, five-year swap (measuring inflation expectations in five years for the following five years) to below two per cent – the metric used to define medium-term inflation – and the weakness in the recovery, even in non-stressed countries. Household consumption is expected to remain sluggish in the medium term due to the high unemployment rate and weak growth in nominal wages. We acknowledge that the leading economic indicators are moving in the right direction, but the pace remains slow. The initial estimate of GDP for the second quarter of 2014 has come in flat quarter on quarter (QoQ).

Source: UOBAM, Bloomberg, as at 10 September 2014

eurozone five-year, five-year inflation forward

In Germany, geopolitical concerns are impacting consumer confidence, exports and investment spending. However, we expect the high level of services purchasing managers’ index (PMI) and positive labour market conditions (due to a pickup in the construction sector) to keep the economy going. We revise our ten-year Bund forecast to trade in the range of 0.9 per cent to 1.1 per cent as we think the disinflationary scenario along with slow growth will keep the Bunds trading in a range at current levels. We are neutral on Bunds with neutral duration and underweight on the Euro.

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14

US Treasury 10 yr

German Bund 10 yr

(0.50)

-

0.50

1.00

1.50

2.00


Spread between 10yr US Treasuryand German bunds

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50


US Treasury 10 yr

German Bund 10 yr

(0.50)

-

0.50

1.00

1.50

2.00


Spread between 10yr US Treasuryand German bunds

Source: Bloomberg, as at 28 August 2014

spread between us treasury and German Bunds continues to widen

us treasury 10 yr

German Bund 10 yr

spread between 10 yr us treasury

and German bunds



Within the other Eurozone countries, we continue to underweight France with short duration as we think the economic fundamentals still do not justify the current yield levels. France is yet again in a political turmoil after the government was dissolved due to a debate on whether the German-led model of fiscal austerity should be continued or should growth be stimulated by policy easing. Despite the relatively weaker fundamentals, investors still favour French government bonds due to the relative pick-up over German bunds. Within the peripherals, we continue to expect tighter peripheral spreads at year end, though we may see some volatility in September due to new supply. Our positive stance on Spain versus Italy has been reaffirmed by the recent growth and PMI numbers. We continue to be tactically overweight on Spain while being neutral on Italy.

spanish Bonds 10 year


italian Bonds 10 year


united KingdomIn the Uk, we may see the Bank of England (BoE) getting ahead of its peers based on the economic data which shows growth continuing to pick up. However, the downside surprise on the inflation front may give the BoE a reason to wait longer before increasing rates. The recent communication from the BoE has also given mixed signals regarding the central bank’s stand. We expect Gilts to get ahead of the BoE with the curve steepening and 10-year yields rising to the range of 2.75 per cent to 2.90 per cent, being long on the pound.

uK Gilts 10 yr




AustraliaThe Australian economy in the early part of 2014 was driven by a large increase in resource exports as new mining capacity came online and mining activity was less disrupted by weather conditions, which is typically the case during Australia’s summer season. However some indicators are pointing to more moderate growth and softer resource export prices. While fiscal consolidation and softer private consumption are lowering growth momentum, dwelling investment growth supports some rebound in business and consumer confidence. Despite retracing from being at par against the USD, the strong AUD continues to weigh on manufacturing, though there has been an increase in services exports such as in tourism and education.

Inflation is likely to remain within the range expected by the central bank with rent inflation declining to the lowest level since the mid-2000s and with wage growth slowing as the unemployment rate continues to climb. The AUD’s strength has been of concern with the central bank saying on various occasions that the currency is overvalued. The AUD has benefited from a search for yield with most of the developed countries’ government yields staying low. While investment flows to the resource sector has slowed, overseas flows to the Australian real estate sector has been driven by macro-prudential measures taken by other countries such as China and Singapore to reduce the risk of asset bubbles. A rebalancing of allocation by global central banks has also benefitted the AUD.

The central bank has maintained the cash rate at 2.5 per cent since August 2013. Yields on longer-dated Australian Commonwealth Government Bonds (ACGB) have declined with expectations of a period of stability in the cash rate and escalating tensions in the Middle East and Ukraine. In view of the central bank’s stance and flatness of the yield curve, we are neutral on the government bonds and expect the AUD to weaken.

JapanThe Bank of Japan’s (BOJ) September Monetary Policy Meeting ended with the central bank making no change to its policy stance. Its outlook for the economy is a moderate recovery. The BOJ thinks that the quantitative and qualitative easing (QQE) has had its intended effects and that inflation expectation appears to be rising on the whole.

We expect various factors to work against the Japanese economy over the next few months. While the tightening labour market is helping to push up wages, the higher inflation is eroding consumers’ purchasing power. Externally, exports continue to be sluggish with some export markets such as Europe still struggling with growth. Japan’s current account continues to slide and even though energy import is one important reason for the weaker trade balance, a significant change in the energy policy is unlikely. With a weak current account balance, we do not expect to see the yen strengthen for now.

We note that Japanese investors’ appetite for foreign bonds has risen again and asset allocation by the pension funds might already be shifting overseas ahead of an official announcement. Given the high sovereign debt and an impending shift in asset allocation from Japanese government bonds, we are underweight on the Japanese government bonds and we are of the view that the JPY has a weakening bias.



EMERGING MARkET FIXED INCOME

ReviewEM bonds over the past quarter have continued to register positive returns due mainly to carry (in other words, coupon returns). The Emerging Markets Bond Index – Global Diversified rallied only two basis points (bps) (5.09 per cent to 5.11 per cent), despite ten-year UST ending the quarter rallying by 13 bps over the same period.

We take some comfort in how EM bonds have performed over the past three months as there were some strong headwinds in the market. First, there was much uncertainty over the Argentinian bond crisis. Argentina is in a legal wrangle with some US hedge funds over a previous default (holdouts). The US courts have ruled against Argentina and demanded that full payment be made to holdouts. Argentina has not yet complied with the US court ruling and some of its bonds have defaulted and not made coupon payments. In the past, this could have led to a contagion within EM but the asset class has since matured and the impact of the Argentina episode has so far not spread to other EM bonds. The second headwind is the Russia-Ukraine crisis. Renewed fighting and further sanctions by both the US and the European Union have not caused any negative contagion in EM. The crisis has impacted only bonds from Russia and Ukraine. Neither of these two events – Argentina or Russia-Ukraine – has been resolved, but EM bonds remain supported.

outlookAt the moment, the EM economies are going through a period of transition and rebalancing. In the last few years, growth has been driven primarily by expansionary policies which have weakened the external sector, increased leverage within the economy and weakened the fiscal position. We view that slower growth at this point is a good thing for EM economies. Most have tightened monetary policies and/or introduced macro-prudential measures to rein in credit expansion. This in turn should reduce consumption imports and improve the trade balance. We believe this is positive over the medium term as it maintains or even improves the credit worthiness of these economies. However, slower growth does not provide a positive catalyst for stronger EM currencies.

A few bright sparks within EM remain. Mexico’s much needed reform agenda appears to be moving ahead in the right direction with labour, energy and other reforms already voted into law. There is still a long road ahead and execution risks remain high, but for now, Mexico is providing the foundation for higher potential growth over the medium term. We remain bullish on Mexican assets. The near-term outlook for EM bonds remains hinged on UST volatility in our view. If UST remain stable, that is, if a rise in yields causes a gradual and orderly correction within a modest trading range, they will continue to be supportive for credit spreads. Barring any major changes, and the unlikely event of a spike in inflation, EM bond yields will likely remain stable around current levels and even rise a little. This will provide investors with positive returns going forward.

EM Local Currency (LC) bonds continue to lag the performance in EM USD bonds. We remain cautious on EM currencies as the growth cycle at the moment does not provide the catalyst for any strong or persistent rally. However, EM LC bond yields remain at elevated levels (lagging the rally in EM USD bond yields). The monetary policies in many EM countries are in fact ahead of the US and we expect more rate cuts to happen in 2015.

strategyWe are positive on EM fixed income. However, near-term valuations are starting to lose its attractiveness. At the same time, if volatility remains low, credit spreads can continue to tighten and support EM bonds, albeit at a lower return. That said, we do believe that this is the asset class to be invested in during any market correction. The long-term fundamentals are sound and continue to be in favour among institutional investors.

We continue to like EM fixed income, although we are of the view that performance in the second half of 2014 will be weaker than the first half, which was very strong. We remain overweight on high yield bonds.



ASIA FIXED INCOME

ReviewAsian credits continued to enjoy a strong rally in the third quarter of 2014 (3Q 2014) as UST yields ground lower during the quarter. The Asian credit market rose 1.78 per cent in the first two months of 3Q 2014 from a rise of 3.11 per cent in the second quarter of 2014 (2Q 2014) and 2.68 per cent in the first quarter of 2014 (1Q 2014). On a year-to-date basis (January-August 2014), Asian credits have risen 7.75 per cent after falling 1.4 per cent in 2013.

Credit spreads widened by 5.11 basis points (bps) in the first two months of 3Q 2014 from a tightening of 19.12 bps in 1Q 2014. Year–to-date, Asian credit spreads have tightened by 18.06 bps. Ten-year UST yields fell 18.7 bps to 2.34 basis points in August 2014 from 2.72 per cent as at end of 1Q 2014 and 3.03 per cent at the end of 2013.

The rally in Asian credits in the first eight months of 2014 confounded expectations and came on the back of a rise in UST with monetary easing by the Bank of Japan, poor US macroeconomic data as well as expectations of the ECB implementing its QE programme. On 4 September, the ECB delivered significant further easing measures by cutting its key policy rate by ten bps and announcing plans to purchase asset-backed securities and covered bonds from October.

Asian credit spreads – JAci indexJACI spread widened by 5.11 bps in the first two months of Q3 2014. Credit spread has tightened by 18.06 bps since the beginning of the year; current spread = 245 bps

Source: Bloomberg, as at 8 September 2014

JAci spread

JAci total Return indexAsian credit market has risen 1.78% during the first two months of Q3 2014; Asian credit market has gained 7.75% YTD

Source: Bloomberg, as at 8 September 2014

JAci total Return index (28 Feb 2010 = 100)

The strong performance of Asian credits was due mainly to the robust performance of the sovereigns. Asian high grade sovereigns rose 11.3 per cent in the first eight months while Asian high yield sovereigns rose 10.2 per cent. The performance of corporate credits was less stellar with Asian investment grade corporates rising 7.9 per cent while Asian high yield corporates rose 7.6 per cent in the first eight months of the year. The three worst-performing sectors were Asian single B credits (+7.1 per cent), Asian single A corporate credit (+6.9 per cent) and Asian financials credits (+5.2 per cent).

outlook and strategy Our in-house leading indicators suggest that economic growth in Asia continued to recover in 3Q 2014 after bottoming in 1Q 2014. Our three-factor Economic Leading Indicator rose 0.81 per cent year-on-year (YoY) in July 2014 from a rise of 0.27 per cent YoY in June 2014 and 0.36 per cent YoY in May 2014. Meanwhile, the six-factor leading indicator recovered to rise 0.67 per cent YoY in July 2014 from 0.27 per cent YoY in June 2014 and -0.22 per cent YoY in May. Both indices are also recovering on a sequential basis, with the three-factor model up 0.42 per cent month-on-month (MoM) and six-factor model up 0.52 per cent MoM.



6-factor CLI and 3-factor CLI recovering

Source: ECRI, Bloomberg, as at 8 September 2014

6 factor: OECD China CLI, SEMI book-to-bill ratio, ISM New Orders, JACI Spread, ECRI Leading Indicator, 3M Copper Futures3 factor: OECD China CLI, SEMI book-to-bill ratio, ISM New Orders

CLI 6 factors (Jan 01=100) CLI 3 factors (Jan 01=100)

Both 6-factor and 3-factor composites strengthened in the past 3 months

Source: ECRI, Bloomberg, as at 8 September 2014

6 factor: OECD China CLI, SEMI book-to-bill ratio, ISM New Orders, JACI Spread, ECRI Leading Indicator, 3M Copper Futures3 factor: OECD China CLI, SEMI book-to-bill ratio, ISM New Orders

CLI 6 factors (% yoy) CLI 3 factors (% yoy)

The Chinese economy appeared to have bottomed sometime in April and is now recovering gradually. Our China activity index, which is based on railway freight volume, loans and electricity production, bottomed at -2.2 per cent YoY in April on a three-month moving average basis and has since recovered to 1.8 per cent YoY in July 2014. We believe that the Chinese economy is now undergoing an incipient but very gradual economic recovery. This should enhance the value of the RMB and credit prices in 4Q 2014.

Energy production grew 5.3% year-on-year in July from 7.7% year-on-year in June

Source: CEIC, Bloomberg, as at 8 September 2014

Production of Energy (% yoy)

Railway freight carried fell 1.35% year-on-year in July from -0.47% year-on-year in June


Railway Freight Carried (% yoy)

Loan growth has stayed resilient in recent months


Change in Financial Institution Loans (monthly change, RMB bn)



China activity index appeared to have bottomed in April 2014

China activity index (% yoy) China activity index (% yoy, 3mma)


Despite the gradually recovering economy, Chinese asset prices continue to fall in view of adverse news. The following chart indicates that Chinese property stocks are now trading at a 44 per cent discount to their net asset value (NAV). Meanwhile, high yield property credits give a yield of around 9.21 per cent as at end August 2014, which is significantly higher than most other Asian high yield sectors.

Chinese property is currently trading at 44% discount to NAV, which is close to 1 SD from the mean

Source: Barclays, as at 8 September 2014

Chinese HY property has the highest yield in Asia HY


We maintain our overweight position on BB-rated Chinese high yield credits and also continue to recommend overweighting on Chinese state-owned enterprises, Indonesian high yield property credits as well as Sri Lankan quasi-sovereigns and Mongolian sovereigns and quasi-sovereigns as these are relatively resilient to higher US interest rates with decent yields.

YTM, %



In terms of the performance of high grade versus high yield credits, Asian high grade was up 1.77 per cent in 3Q 2014 while high yield rose 1.82 per cent in the same period. On a year-to-date basis, Asian high grade credits have risen 7.71 per cent while Asian high yield has returned 7.94 per cent. The spread between Asian high yield and Asian high grade stands at 293.5 bps at end August, which is around 1.63 standard deviation away from the mean of 156 bps. This places the current high yield-high grade spread of 293.5 bps at the 86th percentile (i.e. the current spread is excessively wide). Therefore we believe that high yield credits will outperform high grade credits over the next three to six months.

investment grade total return non-investment total return

Performance of Asian high grade versus Asian high yield Asia high grade is up 1.77% in Q3 2014 while high yield is also up 1.82% in Q3 2014; YTD investment grade credits have returned 7.71% while high yield credits have returned 7.94%

Source: JP Morgan, Bloomberg, as at 8 September 2014



SINGAPORE FIXED INCOME

singapore macro ReviewSingapore’s GDP growth was revised higher to 0.1 per cent QoQ adjusted seasonally in 2Q 2014, moderating from an expansion of 1.6 per cent QoQ adjusted seasonally in 1Q 2014. In YoY terms, real GDP grew 2.4 per cent in 2Q 2014, moderating from a downward-revised 4.7 per cent in 1Q 2014. The slower growth was broad-based across manufacturing (+1.5 per cent YoY in 2Q 2014 versus +9.9 per cent YoY in 1Q 2014), construction (+4.4 per cent YoY in 2Q 2014 versus +6.4 per cent YoY in 1Q 2014) and services (+2.6 per cent YoY in 2Q 2014 versus +3.9 per cent YoY in 1Q 2014). The government has narrowed its 2014 GDP growth forecast to the range of 2.5 per cent to 3.5 per cent, from the earlier estimate range of two per cent to four per cent.

Non-oil domestic exports (NODX) contracted at a slower pace of 3.3 per cent YoY in July, from -4.6 per cent YoY in June. This is the third consecutive month of decline in Singapore’s NODX due to a contraction in both electronic and non-electronic exports. Electronic exports continued to decline for the 24th consecutive month, contracting by 7.9 per cent YoY in July, a moderation from the 17.4 per cent decline YoY in June. Non-electronic NODX fell 1.1 per cent YoY in July from 1.3 per cent expansion YoY in June due to the reversal in pharmaceutical product exports (-5.7 per cent YoY in July from +24.3 per cent YOY in June) and a slower pace of exports in petrochemical products (+20.5 per cent YOY in July from +29 per cent YOYin June). Singapore’s trade agency lowered its forecast for Singapore’s 2014 NODX growth to the range of -2.0 per cent to -1.0 per cent, from the previous forecast range of one per cent to three per cent expansion. The reason for the lower forecast was due mainly to the poor performance of electronics NODX, which will continue to drag the overall NODX growth.

Singapore’s industrial production (IP) grew 3.3 per cent YoY in July from an upward-revised 0.8 per cent YoY in June. This was due mainly to the sharp increase in the biomedical industries’ production and a smaller decline in the production of electronics in July. The bright spot in July was the 28.5 per cent YoY expansion in the biomedical manufacturing cluster, much faster than the 1.6 per cent YoY growth in June. The medical technology segment continued its strong

performance and grew another 30.8 per cent YoY, after expanding 11 per cent YoY in June. Pharmaceuticals output likewise performed well, growing 28 per cent YoY in July from a 0.4 per cent YoY contraction in June. The electronics manufacturing cluster continued a fourth consecutive month of contraction but moderated to decline by 2.9 per cent YoY in July from 4.4 per cent year-on-year contraction in June. Excluding biomedical manufacturing, IP contracted 2.2 per cent YoY in July from an expansion of 0.6 per cent YoY in June.

Headline inflation eased further to a four-month low of 1.2 per cent YoY in July from 1.8 per cent YoY in June on the back of declining private road transport costs and accommodation costs. Private road transportation costs slid to -1.6 per cent YoY in July from +2.8 per cent YoY in June due to a fall in certificates of entitlement (COE) permit premiums that more than offset the rise in retail petrol prices. Accommodation costs were flat YoY, down from 0.5 per cent YoY in June, as a result of easing housing rents. Core inflation, which excludes housing and private road transport, edged higher to register 2.2 per cent YoY in July from 2.1 per cent YoY in June. The Monetary Authority of Singapore (MAS) revised its 2014 headline inflation forecast from the range of 1.5 per cent to 2.5 per cent to the range of 1.5 per cent to two per cent, while maintaining its core inflation forecast at the range of two per cent to three per cent. We believe that the Singapore government remains concerned about the inflation data amid the tight labour market. In April 2014, the MAS maintained its modest and gradual appreciation path of the SGD nominal effective exchange rate (S$NEER) policy band, with no change to its slope, width and the level at which it is centred. This policy stance, which has been in place since April 2012, has helped to alleviate inflationary pressures and anchor inflation expectations, as well as facilitate the restructuring of the economy. However, with the Fed likely to end QE by end 2014, Asian foreign exchange could face selling pressure. Therefore, we expect the SGD to weaken towards the end of 2014.



singapore credit ReviewThe SGD bond market rallied with spreads tightening further on buying from private banking clients and institutions over the past eight months. The HSBC SGD Non-Government Local Currency Bond Index (HSSNACUM Index) increased by 0.64 per cent in the first two months of 3Q 2014 and the index has risen by 3.68 per cent since the beginning of the year. The SGD credits’ move higher has been on the back of flush liquidity, improving market sentiment and an overall low rate environment.

The secondary market was also supported by a limited supply of investment grade issues. Shorter-dated, good quality papers were well-bid and corporate perpetual yields remained largely unchanged with investors picking up bonds on dips. Buying interest from private banking clients continued to concentrate on the high yield space where attractive leveraged yields were the main drivers of demand.

Primary corporate bond issuances continued to be active. Apart from mid-capitalisation companies tapping the market at issuance sizes of less than S$100 million, established names such as Capitamall Trust issued S$300 million of 10-year bonds and CapitaLand issued S$500 million of 10-year bonds on the back of strong demand from institutional investors. Lend Lease Retail Investments also issued S$300 million of seven-year bonds secured on JEM, one of the largest suburban malls in Singapore. Given the strong liquidity and higher risk appetite from private banking clients, an increasing number of high yield issuers was able to tap the SGD market successfully in sizeable amounts such as the S$300 million of three-year bonds from Pacific International Lines, S$400 million of five-year bonds from Olam International Ltd, S$125 million of 5NC3 bonds from Halcyon Agri Corporation, S$175 million of NC2 perpetuals from Hyflux Ltd, S$200 million of three-year bonds from Pacific Andes Resources Development Ltd, S$200 million of four-year bonds from krisEnergy Ltd and S$200 million of five-year bonds from Nam Cheong Ltd.

Apart from foreign issuers tapping the SGD market for opportunistic funding, we continue to expect high yield issuances by mid-capitalisation companies, subject to market conditions.



fixed income strategyfixed income asset allocation * – n + fixed income developed dm govt dm...

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