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Don Yew, manager research analyst at Morningstar
Some analysts believe the global economy is showing signs of a gradual broad-based upswing, whether as a result of prolonged stimuli or as a reaction to pro-business rhetoric coming from US president Donald Trump. In this view, the Asian bond market presents clear opportunities for investors.
But significant risks are evident. Interest rates in the US have been raised and are headed higher, perhaps faster than expected. That could lead to capital outflows from Asia, ratcheting up default risk, particularly in China. Debt levels in China are near those in the US at the start of the housing crisis.
Asian bond fund managers that carefully do their homework, however, can also benefit from currency movements, rate increases, yield curve adjustments and credit improvements that tend to come with a growing economy.
“There are a lot of moving parts,” said Don Yew, manager research analyst at Morningstar.
Together with Morningstar, FSA selected two Hong Kong-based Asian bond products for comparison, the HSBC Asian Bond Fund and the top asset gatherer in the Mutual Recognition of Funds scheme, the JPMorgan Asian Total Return Bond Fund.
|HSBC Asian Bond Fund||JPMorgan Asian Total Return Bond Fund|
|Inception||24 July 1996||18 January 2005|
|Fund Size||US$ 2.799 bn||US$ 3.113 bn|