The long-awaited inclusion of onshore China bonds in a global index is a tipping point for fixed income investing that may influence portfolios going forward.
Cecilia Chan, fixed income CIO for HSBC Global Asset Management in Asia-Pacific, is preparing for a more volatile landscape in 2018, seeking to add alpha from the opportunity to manage portfolios more actively again.
The prospect of US interest rate hikes has spurred fears of a potential sell-off in global bond markets. Asian fixed income markets have been relatively resilient, despite the recent heightened volatility in US and European bond markets, and we continue to be positive on the asset class outlook going forward.
Offshore RMB bonds delivered lacklustre returns for most of the first quarter but have recently seen a significant turnaround as liquidity conditions have improved drastically. Further monetary loosening in China and easing liquidity conditions will continue to support a recovery in performance.
HSBC’s Cecilia Chan looks to shorten durations, going long Asian currencies and using bond ETFs for Hong Kong dollar exposure in pan-Asian bond portfolios.