Asian bonds continue to appeal despite trade tensions, says Manulife Investment Management

News release

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TSX/NYSE/PSE: MFC     SEHK: 945
For immediate release
December 20, 2019

LONDON, U.K.—Asian fixed income has retained its appeal to investors despite prolonged uncertainty arising from the U.S.-China trade war. Manulife Investment Management’s Asian fixed-income team believes the asset class can be an important source of positive return within fixed-income allocation, particularly against a macroeconomic backdrop defined by slowing growth and falling yields.

A recent Manulife survey found that a majority of investment professionals are in agreement: Despite concerns about the ongoing trade war and a slowdown in Chinese growth,¹ 59% of respondents planned to either increase or maintain their allocation to Asian bonds this year. 

According to Endre Pedersen, CIO of fixed income, Asia, at Manulife Investment Management, economic fundamentals in Asia remain strong. Crucially, the region’s policymakers have more room to implement measures to revive growth, in terms of fiscal and monetary policies, relative to their peers in developed economies.

“Yield matters, especially at a time when we’re not just returning to a lower-for-longer growth environment, but one where sub-zero borrowing costs are likely to become a prominent feature of the fixed-income market,” said Mr. Pedersen. “This is why we find Asia attractive. Although we’re likely to see more rate cuts within the region, interest rates in emerging Asian economies remain relatively high, and stimulus actions will continue to provide support for the asset class.”

“It’s also important to note that the yuan-U.S. dollar exchange rate has remained relatively stable since August, and we don’t expect that to change in the near term,” added Neal Capecci, managing director, fixed income and portfolio manager, Pan-Asia Bonds, at Manulife Investment Management. “Taking into account the overall macroeconomic climate and challenges, we believe the Asian bond market presents compelling opportunities for investors in search of strong, sustainable yield.”

Manulife Investment Management’s flagship Asia Total Return Bond Strategy recently marked its 10^th anniversary. The strategy adopts a flexible and dynamic approach to the rapidly growing asset class, allocating across a wide range of currencies and credits in the Asia-Pacific (ex-Japan) region. Since its inception in September 2009, the strategy’s unique approach has created opportunity for investors through a diverse range of market environments.

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1 “The Manulife Asian Bond Survey” was designed by Prosek Partners Stealth Survey™ and conducted at the 2019 FundForum International conference in Copenhagen, Denmark. The data is based on responses from 100 attendees, including asset managers, intermediaries, fund buyers, and asset owners

• When asked if investors were likely to increase or decrease an Asian bond allocation in the remainder of 2019, 33% responded they would maintain allocation, 26% would increase allocation, 1% would decrease allocation, and 40% didn’t have an allocation.
• Of those surveyed, the key concerns around investing in Asian fixed income were 35%, the US-China trade war; 26%, the slowdown in Chinese growth; 20%, emerging-market characteristics; 16%, liquidity; and 3% didn’t answer.
• After low correlation to other asset classes and positive returns on a rolling basis, respondents cited exposure beyond traditional benchmarks (20%); mitigation of drawdown risk and volatility (16%), and more issuer-specific, less marketwide risk (11%) as the most important attributes when choosing an Asian bond strategy. Four percent didn’t answer.

About Manulife Investment Management

Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than 150 years of financial stewardship to partner with clients across our institutional, retail, and retirement businesses globally. Our specialist approach to money management includes the highly differentiated strategies of our fixed-income, specialized equity, multi-asset solutions, and private markets teams—along with access to specialized, unaffiliated asset managers from around the world through our multimanager model. Our personalized, data-driven approach to retirement is focused on delivering financial wellness in retirement plans of all sizes to help plan participants and members retire with dignity.

Headquartered in Toronto, we operate as Manulife Investment Management throughout the world, with the exception of the United States, where the retail and retirement businesses operate as John Hancock Investment Management and John Hancock, respectively; and in Asia and Canada, where the retirement business operates as Manulife. Manulife Investment Management had C$854 billion (USD$652 billion) in assets under management and administration.² Not all offerings are available in all jurisdictions. For additional information, please visit our website at manulifeinvestmentmgt.com.

2 MFC financials. Global Wealth and Asset Management AUMA as of 9/30/19, was C$854 billion and includes C$195 billion of assets managed on behalf of other segments and C$140 billion of assets under administration.

Media contact                                    

Elizabeth Bartlett                                  

+1 857-210-2286                                  

Elizabeth_Bartlett@Manulife.com