As Asian investors’ most pressing concern shift from the impending US Federal Reserve rate hike to worries about a lower return outlook, PIMCO’s fund flows survey shows an overwhelming (80%) desire to increase exposure to European and Japanese equity. That top asset allocation call, based on responses by PIMCO’s clients and distribution partners, is followed by increasing allocations to liquid alternatives (70%) and Asian equity (56%). Investors in the region also continue to reach for income via increased exposure to Asian credit (31%) – despite having already invested 66% of financial assets in Asia. In addition to worries about lower return prospects – the US asset manager’s GDP growth projection for China is 5.5-6.5% – concerns over bubbles in various markets also ranked high. This was likely the result of the A-share plunge and yuan devaluation in July and August this year, when PIMCO conducted the survey. “Rising rates are still on the list, but the fear has clearly subsided,” says Michael Thompson, executive vice president and head of wealth management, Asia ex-Japan. “There seems to be a broad acceptance among investors that the process of normalising monetary policy in the US is likely to be gradual and well telegraphed and that it will end at a lower rate than in previous rate-hike cycles.” “Revisit high quality bonds” Over the past year, multi-asset strategies have been the clear consensus buy in the region, with a little more than half of PIMCO’s clients viewing it as a core allocation….
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