EM corporate debt offers positive real yields while Japan stocks are increasingly attractive as a proxy for global growth. Moreover, Asia is set to benefit from the global upturn in the next phase of the cycle.
The pension fund manager is looking to add to a small allocation in the country's fixed income assets, while it is staying neutral in equities over concerns of high volatility.
Most current valuations have already accounted for the uncertainty regarding the length of the recovery.
Moody’s and Fitch Ratings say that emerging market defaults are increasingly likely to hit record highs, with Asia-Pacific corporates looking particularly vulnerable.
Cathay Life and Shin Kong Life have been upping their exposure to emerging market bonds. They and Fubon Life have also generated strong returns from high-dividend stocks.
Emerging-market equities still have room to rise, but EM bonds face potential problems that could scupper their rally, says Tai Hui, the fund house’s chief market strategist for Asia.