Softer Economy, Rate Cuts To Boost Preferred Securities In Utilities, Regional Banks - Manulife

KUALA LUMPUR, Oct 1 (Bernama) -- A softer economic downturn and interest rate cuts could create favourable conditions for investing in preferred securities, particularly in electric utilities and regional banks, according to Manulife Investment Management (M) Bhd.

Portfolio manager Joseph Bozoyan said Manulife is optimistic about both sectors, citing a high level of new issuance in the electric utilities market, bolstered by falling rates.

“Regional banks are showing strong relative valuations as they trade at deeper discounts to par, following the United States regional banking issues in early 2023, which have weighed on the asset class,” he said in a note.

Bozoyan said Manulife maintains a positive view of asset classes offering unique opportunities for fixed-income investors seeking potentially attractive returns.

“We maintain a balanced view of performance across global credit asset classes. We see opportunities to invest lower in the capital structures of high-quality businesses to achieve competitive income generation.

"The flexibility to select securities from a broad credit universe, and allocate across fixed-income sectors and up and down the credit spectrum, should help navigate a potentially softer economic landscape,” he said.

Bozoyan also believes there are attractive opportunities within credit and spread sectors to generate income, with the potential for spread compression and limited risk of permanent capital impairment.

“Although the Federal Reserve has reduced some uncertainty around its first interest rate cut, future moves will depend on economic data. In recent months, economic results have been mixed, with softness in areas like the labour market and strength elsewhere,” he added.

-- BERNAMA