Highlights

  • Recovery underway in China
  • Broader Asia somewhat mixed
  • A Look at Fundamentals in Asia HY Corporates
  • Signs of Stabilization in Ratings Trends
The recovery in spread that started in Q2 continued into Q3. However sentiment stalled slightly in September as headlines on the upcoming US Presidential election and a second wave of COVID-19 infections moved across Europe.

Despite short-term volatility, we believe the trends that supported the recovery will continue through year-end. Specifically, we expect central bank policies to remain accommodative well into 2021 prolonging a low yield environment that should support demand for spread products. While markets remain optimistic that a vaccine in 2021 will usher in a return to normalcy, we believe the pandemic will leave a lasting impact on the investment landscape. However, until we are past the pandemic period, we cannot begin to fully assess the potential lasting economic impact on economies.

We believe Asia, anchored by China, is better prepared to overcome the pandemic related growth challenges. We also view Asia as better positioned to navigate the rapid changes spurred by the COVID-19 response. Stronger growth prospects coupled with the chase for yield supports a constructive demand backdrop for Asia high yield (HY) credit, which we believe offers an attractive carry opportunity.
This material has been provided for information purposes only to investment service providers or other Professional Clients, Qualified or Institutional Investors and, when required by local regulation, only at their written request. This material must not be used with Retail Investors.