Optimize Fixed Income Portfolios, Asia Bonds

Teresa Kong, a CFA and portfolio manager, cited Asia bonds as a source of diversification, particularly when fixed income yields domestically are not offering comparable returns.

Related: Asia ETFs Join Worst Losers in Trade War Selloff

Points discussed:

  • Asia is one region to look at during low-yield environments without accepting too much risk
  • Asia growth has accelerated–Asia accounts for 20 percent of global GDP while Latin America is lagging at 8 percent
  • Emerging market debt benchmarks tend to be underweighted when compared to Asia since most of them are weighted by market capitalization
  • Investors can benefit from a dedicated allocation to Asia, particularly creditworthy debt investments
  • One area of opportunity worth looking at is Asia high-yield investments
  • Asian high-yield debts have generated a 10 percent return with 10 percent volatility–a higher return compared to U.S., European and Latin American high-yield investments
  • Risks associated with investing in Asia: political, social and economic; accounting standards differ, nascent bankruptcy codes and varying degrees of corporate governance

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