Amid tight valuations, stay active in Asian investment-grade bonds

THE Asian investment-grade (IG) bond segment delivered a 7.4 per cent return in 2023 (in local currency terms, based on Bloomberg indices), marking a rebound from 2022, when many bond markets were hit by the sharp pace of Fed rate hikes.

Looking ahead, we think that macro and issuer fundamentals remain robust within the space, but caution is warranted on increasingly tight valuations.

Decent fundamentals

On the macro front, we expect Asia to continue to deliver resilient growth in 2024. This is a view echoed by supranational organisations such as the International Monetary Fund, which forecasts a 4.2 per cent growth for the Asia-Pacific region, and the Asian Development Bank, which forecasts a 4.8 per cent growth for developing Asia.