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Manulife, Eastspring, First Sentier among top local currency bond houses
Asia’s local currency bond markets continue to draw sellside attention, and with rate hikes peaking especially in the US, investors in three markets stand out
Asset Benchmark Research 17 Aug 2023

Manulife, Eastspring, and First Sentier were among the top multi-market fixed income investment houses in the latest results of this year’s Asset Benchmark Research (ABR) Asian Currency Bond Benchmark Review. Other houses that fared well include Nikko Asset in Singapore, SBI Mutual Fund in India, AHAM Asset Management in Malaysia, BPI Asset Management Trust in the Philippines, and Kasikorn Asset Management in Thailand.

Indonesia, Malaysia and India attracted the most interest from the sellside active in Asia’s local currency bond markets, according to the ABR survey.

Indonesia topped the ranking with 21% of the sellside votes for the Most Astute Investors. Malaysia was next with sellside votes accounting for 18% of the ranked Most Astute Investors. India is a close third with 16%.

All three markets are viewed positively in part due to the accelerating shift in supply chains out of China following the pandemic. For Indonesia and India, other factors such as favourable demographics, macroeconomic reforms, infrastructure build-out, and embrace of digitalization are also drivers of investors’ interest. Expectations are positive for these markets with the potential of capital gain from currency appreciation, according to some analysts’ view.

Elevated US treasuries, however, remain the biggest drag on investing in Asia’s local currency bond markets, the ABR report shows. Last year’s unprecedented US Fed rate hikes sparked a record outflow of funds from the emerging markets, including Asia.

Other key concerns were inflation and slowing growth, which ranked second and third respectively among considerations that would impact how local currency markets perform in the coming period. The second half of 2023, however, could mark the low point as US Fed slows the pace of rate hikes and post-Covid supply chain shifts normalize.

The inflation outlook in Asia is likely to stabilize in the coming period. Central banks in the region have also reached or are nearing the end of their rate hike cycle, opening the way for investing opportunity in the local bond markets. The latest report from the Asian Development Bank showed that local debt issuance during the period to March 2023 was up more than 9% compared with a year ago.

With bonds now showing attractive risk-adjusted returns, these emerging markets are drawing investors’ attention given the attractive returns for rates and high-grade credits. In addition, with issuers such as renewable energy companies in India expected to come to the market, asset managers with ESG mandates are also adding to the expected demand.

Notwithstanding the challenging backdrop of local currency bond markets over the past 12 months, the ABR Asian Currency Bond Benchmark Review 2023 saw a record number of participants. Nearly 250 sellside individuals took part in the voting for the annual ranking for Most Astute Investors. This represents a more than 65% increase from the total in 2022.

The Review results are being published alongside ABR’s Most Astute Investors list and the Top Investment Houses league table. The number of buyside institutions nominated also recorded a sharp increase of over 40% this year when compared to a year ago.

Among the Most Astute Investors in Indonesia, Ezra Nazula, chief investment officer, fixed income, at Manulife Asset Management Indonesia (MAMI) topped the ranking this year. A consistent ABR Most Astute Investor, Ezra has been with Manulife for more than 15 years and applies a risk management approach to achieve an optimal risk-return profile. Other ABR Most Astute Investor this year were Akbar Syarief, portfolio manager at Danareksa Investment Management, and Syuhada Arief, senior manager at MAMI.

Topping the list of India’s ABR Most Astute Investors is Badrish Kulhalli, fund manager and head of fixed income at HDFC Life. Also a consistent ABR winner, Kulhalli believes the increased penetration of insurance retirement products in the country will underpin appetite for long-maturity bonds, thereby supporting the growth of India’s US$1 trillion bond market. Other highly ranked ABR Most Astute Investors in India were Hardik Shah, fund manager at Axis Mutual Fund, and Rahul Goswami, who recently moved to Franklin Templeton Mutual Funds to become the chief investment officer, fixed income, from ICICI Prudential Asset Management.

In Malaysia, the top three ABR Most Astute Investors were Edward Teo, senior portfolio manager, fixed Income, at AIA, who has clocked ten years in the industry; Teng Yue Xiang, deputy head, fixed Income, at AmFunds Management; and Kah Kit Low, senior fixed income portfolio manager, RHB Asset Management. All three are repeat winners in the ABR Most Astute Investors’ rankings in the ringgit bond market.

For the full list of ABR Most Astute Investors 2023, please click here.

For the full list of ABR Top Investment Houses 2023, please click here.

Asset Benchmark Research is hosting a gala dinner in Singapore in November 2023 to celebrate the winners and the winning investment houses. To reserve your seat and to book a table, please click here.

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