Pulse on Asia

Asia's financial markets offer a compelling structural story that began more than 20 years ago.

Asia Economic Outlook

Explore PIMCO's macro insights on the Asian economy

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DELIVERING MORE

Asset Class Outlook

 

CREDIT

While Asian credit spreads have widened over the quarter, the technical picture remains challenging since China’s deleveraging policy will likely result in more corporate defaults, along with redemption pressure from dedicated funds. Dispersion and credit differentiation between companies has increased, so we are focused on more resilient issuers and will be minimally positioned in opaque issuers despite the valuation gap.

 

RATES

We are currently broadly neutral rates in emerging Asia, including China and India. Despite our neutral stance on China, we are monitoring shorter-dated government bonds for tactical opportunities (on a U.S. dollar hedged basis).

 

CURRENCY

Broad-based global growth is showing signs of moderation. EU data points to a slowdown in activity with risk tilted to the downside. China data has been soft and “trade wars” a drag on sentiment. Against a backdrop of a more challenging global environment (tighter financial conditions and a stronger U.S. dollar), we remain cautious and continue to recommend positions that are overall U.S. dollar neutral and well-diversified.

Investment Ideas

A snapshot of PIMCO's investment approach to fixed income investing in Asia.

Disclosures

Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee there is no assurance that private guarantors will meet their obligations. High-yield, lower-rated, securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversification does not ensure against loss.


There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.


Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice. Forecasts, estimates and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Forecasts and estimates have certain inherent limitations, and unlike an actual performance record, do not reflect actual trading, liquidity constraints, fees, and/or other costs. In addition, references to future results should not be construed as an estimate or promise of results that a client portfolio may achieve.


This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. It is not possible to invest directly in an unmanaged index. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2018, PIMCO.