Asian bond markets attract an ever-increasing number of investors. The latest analysis by the experts of Invesco, one of the most important independent groups in the asset management sector, is dedicated to this scenario. “With higher returns, on average, than those of the main markets – reads the report – investors have the opportunity to participate in Asian growth by benefiting from attractive risk-adjusted returns. Asia delivers an ever-increasing range of possibilities, with issuers of all kinds. The economic foundations continue to be solid and will continue to support growth and potential currency appreciation.
Asian debt markets are evolving rapidly: the volume of local bonds has more than doubled in the last five years alone. However, the size of the market in relation to GDP is still small compared to that of the United States or Japan. “That means they're still there wide margins for growth, because mainland governments and companies are looking for long-term financing and international investors need to diversify their activities out of international markets,” said Frankie Tai, associated director of Invesco Hong Kong.
While government bonds still dominate these markets, the recent boom is mainly linked to the growth of corporate bonds. For now, foreign investors have only limited access to the most important of these markets, China, but according to Invesco experts this situation is set to change as the People's Bank of China gradually eases restrictions. Other markets, such as Korea, the Philippines and Indonesia, are more accessible.
The contraction in growth in developed economies will also weaken Asia, but Invesco points out that there will be positive effects on the inflation front. In short, it is certainly "a dynamic market, not without risks, but full of opportunities", concludes Tai.
