Is it time to return to Asian high-yield? Here’s what we are watching
China’s property will remain a significant drag on Asian HY performance, but India is set to play a larger role, thanks to its renewable energy sector
THE rally in Asian high-yield (HY) bonds has lost its steam. The bond market, as gauged by the Bloomberg Asia USD High Yield Bond Index, has retraced some gains from November 2022 and is at one of its lowest levels of the year.
China a driver of Asian HY
Since its 2021 property crisis, China has become a major underperformer within the Asian HY bond market. Prior to the crisis, the China corporate HY bond market – dominated by bonds from property developers – made up over half of the Asian HY universe. This highlights the idiosyncratic risks associated with one single sector.
Today, Asian HY is becoming more diversified in terms of market composition. China’s weight has shrunk drastically from over 50 per cent in 2021 to 28 per cent in June 2023. Meanwhile, the weightage of its smaller counterparts – India, Hong Kong, and Macau – rose significantly.
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