1. Do you see the valuation gap between Asian, US and European credits closing in the future?

TB: I think the valuation gap will close and it is our job as asset allocators to be ahead of that shift. I can see real conditions in which our allocations to the Asia region will pick up, particularly given the paucity of opportunities elsewhere. I think this is one of those opportunities that will be arbitraged away pretty quickly, so I think being proactive rather than reactive is vital when it comes to Asian fixed interest. AZ: We definitely see an upside for credit spread compression, particularly in Asian high yield. Currently, we like the property space within the USD Asia fixed income asset class. Looking at US high yield with spreads trading at around 400bps, or even slightly below, compared with Asian high yield with spreads of around 700bps, the Asian space is definitely an interesting asset class.

2. What are you expectations this year for Chinese monetary policy?

AZ: The rebound in the Chinese economy is already the most advanced. We have seen some measures that will likely mean the growth in the credit impulse will probably roll over. We still think some support will be needed, particularly with Europe going into lockdown and pressure coming from the external sector. But the recovery has already gone quite far, and we have already seen the Chinese government and People's Bank of China (PBOC) trying to take their foot off the gas. However, we don’t expect interest rate hikes at this point and we have quite a stable outlook for the rates side of the bond market.

3. Could the RMB move to reserve status in both the Asia Pacific region and globally?

TB: Following the policies of isolationism over the past four years in the US, a lot of vacuums have been created that China has moved into very efficiently. The Biden administration will change that to a certain degree, but I expect China will continue to move up in terms of influence over the short, medium, and long term. So I think the RMB will increasingly become part of global currency usage – firstly in Asia itself, then with its trading partners in Eurasia as part of the One Belt, One Road policy. China’s influence on the economic, financial, political, and military sphere will continue to grow and that will be reflected in the increasing use of the RMB. I think also there will be increased use in the West of Asian and Chinese fixed interest as part of asset allocation.

4. How do you factor politics into your overall asset construction?

TB: We definitely have to factor this in – just look at the first two weeks of 2020. For all the talk of hope and reconciliation in the US, we can see there has already been backward steps. I think it will be very difficult in the US to appease 75 million disaffected voters as we go through the next couple of years. The bigger problem that the West has is the increasing gap between the rich and the poor, and I think that will lead to increasingly volatile social situations that will drive increasingly extreme political decisions. So I think that is certainly a factor we need to take into account. Increasingly, from where we sit here, Asia looks a relative safe haven.