Value Partners remains constructive on both Asian investment grade (IG) and Asian high yield (HY), according to its fixed-income mid-year outlook.
The Hong Kong-based asset manager said that it remained constructive on Asian HY due to the decent spread pick-up over IG and its US HY peers.
Meanwhile, it noted that disinflationary trends would provide a constructive backdrop for IG bonds and duration, despite spreads being towards the tight end.
Value Partners’ comments come as the outlook for fixed income generally during the first half has been clouded somewhat due to spread compression.
However, its adherents point to the fact that all-in yields are attractive, while despite mixed data, the likelihood is that the US Federal Reserve will still begin cutting later this year, which should provide for some capital appreciation.
These views were echoed somewhat by Value Partners, particularly with regards to the outlook for Asian IG.
“We continue to think spreads are on the tight side. However, the sector should offer defensiveness with an attractive all-in yield and favourable technicals,” it said.
“We see little room for spread compression on a spread pick up of 30-40bps over its US peers, which we believe is fair.”
Value Partners also noted that Asian HY exhibited a decent spread pick-up over IG and its US HY peers as well.
Its picks for Asian HY are very much consensus including Macau gaming, where it expects to see substantial Ebitda growth among the operators, which would help with their deleveraging efforts.
Regarding China property, which makes up still a significant proportion of Asia HY and has rallied this year on policy support measures, Value Partners said that it believes most of the reforms have already been priced in and it was neutral on the sector.
Regarding India, Value Partners also noted that it expects growth to remain robust and the election result, albeit surprising, should buttress policy support, particularly with regards to infrastructure spending and fiscal consolidation.
