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HEAD-TO-HEAD: Blackrock vs HSBC

FSA compares the the BGF Asian Tiger Bond Fund and the HSBC Asian Bond Fund.

by Fund Selector Asia 29 June 20181 August 2022

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Don Yew, Morningstar

Asian fixed income funds

It has not been a good year for bonds.

As of the end of May, cash has outperformed all fixed income sub-asset classes, according to JP Morgan Asset Management’s guide to the markets.

Fixed income returns	YTD (31 May)
Cash	0.6%
US high yield	-0.2%
Developed market government bonds	-0.6%
US treasuries	-1.1%
US dollar Asian bonds	-2.0%
US investment grade	-2.7%
Asia high yield	-2.9%
Europe high yield	-3.7%
US dollar emerging market debt	-4.3%
Local currency emerging market debt	-5.4%

Source: JP Morgan Asset Management

Asia-focused bonds have also underperformed developed market peers.

However, within the Asia bond universe, US dollar-denominated Asian bonds have so far outperformed their local currency counterparts, according to Don Yew, Singapore-based analyst for manager research at Morningstar.

“That’s because the US dollar has strengthened this year,” he said, adding that the situation has reversed from last year, when local currency Asian fixed income funds outperformed hard currency peer funds.

UBS Wealth Management recently took note of the strengthening of the US dollar, which has hurt some of its emerging market positions in equities, currencies and sovereign bonds.

“The biggest change in our tactical positions would be taking off the overweights that we had in currencies outside the dollar,” Mark Haefele, UBS Wealth’s global chief investment officer, said.

State Street Global Advisors and Eastspring Investments have also recently taken note of the appreciation of the US dollar and have made tactical allocation changes.

Against this backdrop, FSA asked Morningstar’s Yew to look at two Asia fixed income funds: The BGF Asian Tiger Bond Fund and the HSBC Asian Bond Fund.

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