Though the macro environment at large remained benign, credit events closer to home further bolstered the need for active management. Many of Asia’s remaining single bond yield chasers were reminded of the importance of due diligence and the necessity of diversification after five more commodity-related companies defaulted on around US$690 million worth of debt closer to home in Singapore. Many analysts predict more defaults to follow for structural reasons, and this risk is seeping into other sectors.
Though Singapore’s woes represent a small part of a market, whose current high yield default rate is at a manageable sub-1% level, they have nonetheless manifested wholesale awareness of credit risk and diversification among the region’s HNWIs. And this will only gain steam as the Fed signals what could finally be the end of a 30-year bond bull market that has encouraged investors to forego due diligence with abundant liquidity and low rates enabling credit markets to mute underlying risks.
Managing Asia bond allocations is no simple responsibility in a market that will continue to rely on higher local rates to generate yield. This year, the region’s leading gatekeepers have selected BlackRock as the Best Fund Provider – Asia Bond.