KUALA LUMPUR, Oct 16 -- Governments across Asia have been swift and surefooted in implementing their economic stimulus measures, including interest rate cuts, extra liquidity injections and tax cuts amid the current pandemic situation, said HSBC Bank Malaysia Bhd (HSBC Malaysia).
Malaysia, for example, has been especially proactive, launching a series of fiscal and monetary measures aimed at helping the local communities and companies weather the current economic storm, it said.
"Whilst many investors will be rightly concerned with the potential for default in these turbulent times, we feel Asia corporates will be comparatively more shielded from these vulnerabilities," it said in a statement.
For investors searching for pockets of stronger certainty, HSBC Malaysia noted that the Asian credit market is proving to be more resilient than other markets and asset classes, particularly in the high yield space due to a confluence of factors.
On the whole, Asian economies have proven to be more stable than their counterparts in other parts of the world. Gross domestic product growth in Asia, for example, has been and is expected to remain, stronger than other regions in the world.
This is largely attributable to the underlying economic robustness, as well as strong and coordinated government policy support.
While China remains the key engine of growth in Asia, the region is also supported by a number of dynamic, well-run economies throughout North and Southeast Asia.
In the light of the current volatility, adjustments in the Asian credit market in late March have made valuations more attractive than in previous years for high yield markets and investment grade markets.
The stability of Asia credit is also further enhanced by a much lower average duration than other global credit markets.
Asia will experience a relatively low rate of default with Asian bonds exhibiting low correlation to other asset classes and thus they have the potential to improve returns and potentially lower the volatility of a global high yield bond portfolio, thus offering good diversification.
Meanwhile, HSBC Malaysia head of wealth -- wealth and personal banking, Jon Chivers, said amid the uncertainty and volatility brought on by the pandemic, the combination of relatively high yield but lower duration of Asian credit markets, which are also bolstered by a historically lower default rate than virtually any other major regions, makes the Asian credit markets and their high yield segment in particular, a beacon of light for investors who are looking for a steady ship.
“On top of that, the US Federal Reserve’s decision as shown in its economic projection to keep interest rates near zero for a longer period, plus the various cut in Overnight Policy Rate by Bank Negara Malaysia would be important factors too,” said Chivers.
Malaysian National News Agency
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