Having Asian corporate bonds in portfolio can enhance returns

INVESTORS looking to enhance the performance of their portfolio without taking on too much added risk are unlikely to go to Asian corporate bonds as their first port of call. But according to analysis from Schroders, an allocation to Asian corporate bonds can have considerable risk-reward benefits.

The large fluctuations in Asian equities and currencies, coupled with the steady stream of headlines on the potential risks around China, tend to give an impression that the region's markets are somewhat unstable. Where corporate bonds are concerned, this is certainly not the case.

Asian corporate bonds have exhibited an enviable balance between returns, yield income and risk over time. These dynamics have been underpinned by strong fundamentals. At a country level, Asia displays encouraging long-term growth drivers, which are solidifying, as well as the added assurance of prudent public finances and high savings. The corporate sector itself is highly cash generative and has a low level of debt.