Asia remains a top destination for global fixed-Income investors

SINGAPORE - A strong majority of fixed-income investors polled by S&P Global Ratings plan to increase their allocations to Asia this year. This is up from previous rounds of the same survey, and comes despite increased volatility and rising bond yields.

"Even in a rough year, as 2018 has been so far for Asian bond markets, the momentum is unmistakable," said Ritesh Maheshwari, S&P Global Ratings Managing Director and Regional Head, Market and Franchise Development.
 
"Companies and Governments continue to expand the variety of debt offerings, and global investors are positioning to grow their long-term presence in the region."
 
The survey, conducted in partnership with HSBC, showed many investors expect spreads to continue to widen for sovereign and high yield debt.
 
But the same group of respondents remains optimistic on many fronts. They believe that China's economic growth trajectory will stay on course with gradual deceleration, that opportunities in infrastructure and telecoms look good, and that default risk is not a major concern.
 
Some 91% of global investors intend to increase their exposures to Asian credit markets over the coming year, up from an average of 80% over the past four rounds of the biannual survey.
 
The surge is most pronounced among non-Asian investors, with 88.2%, up 12.8% from the previous round in second half 2017.
 
Interest in infrastructure has sharply risen, with nearly 80% of those polled planning to increase their exposure to this sector, up 15% from the previous round.
 
More than half (55.6%) of global fixed-income asset managers plans to raise their exposure to China over the next 12 months, a 10% increase from the
average of the previous four rounds. This is followed by India (up 1.2% to
43.8%) and Japan (up 8.1% to 39.3%).
 
While asset managers continue to view China as a major fixed-income investment destination, they are not blind to the risks. Investors polled do not expect default rates to rise, but if they do, then China property
is tagged as the most likely sector.
 
Other findings from the survey include:
 . 21.3% of investors are currently invested in green bonds, up from an

average of 14.3% from the previous rounds. Demand for green bonds is
likely to continue to rise as 61.8% of investors plan to further increase
their exposure, compared to an average of 50.6% in previous rounds.
 
. The proportion of polled investors holding onshore Chinese bonds, at 18%,
has nearly doubled since we started this survey in 2016.

. The top three drivers cited for responsible investment are market
expectations (72.4%), corporate social responsibility (61.5%) and
regulations (51.7%).

•The top four pressing industry issues facing the investors regardless of
geography are (1) compliance burdens becoming insupportable (74.2%); (2)
fee competition from passive index tracking funds (47.2%); (3)
competition from disruptive FinTech players (33.1%); and (4)
future-proofing against the rising tide of artificial
intelligence-supported investment strategies (19.7%).
 
www.standardandpoors.com (ATI).