We expect to see a normalization in yields … over the next 1-2 years and that will create a very compelling opportunity for clients from a return perspective
Ross told investors that historically current yield levels were only seen in the worse periods of the Global Financial Crisis back in 2008 / 2009. While there may be general concerns about the growth outlook, investors are being well compensated for some of these challenges.
And history has taught us to look past the current volatility.
Asian high yield bonds outlook
It's not just about yields
Ross elaborates that it's not just about yields. The Asian high yield story is also supported by two strong underpinnings:
1. Macro support within region, especially in China
Ross and team focus a lot on what's happening on the ground in China and watch the credit impulse signal carefully. They expect China's credit impulse to move higher and this will be critical for the overall Asian high yield market.
2. Fundamental resilience of the Asian high yield bonds
The Asian high yield universe has low exposure to commodity markets and consumer cyclical bonds. These sectors are under pressure from the oil price volatility and movement lockdowns. That is why no big pick up in defaults in expected in Asian high yield bonds.
Tap the opportunity in Asian high yield bonds
Ross Dilkes is a portfolio manager with the Pan Asia fixed income team and has strategy responsibility for selection of corporate issues in Pan Asian portfolios. Ross also contributes to the development of sector and industry allocation strategies across Pan Asia portfolios.
Ross joined UBS Asset Management in December 2005 as a credit analyst within the European Credit Research team based in London.
Ross transferred to the APAC Fixed Income team located in Hong Kong in 2009 where he was responsible for credit research coverage of APAC investment grade and high yield issuers.
Prior to joining UBS Asset Management, Ross worked for Debtwire in London as an analyst covering high yield, distressed debt, leveraged finance and restructuring situations.
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