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Asia remains an attractive market for both bonds and equities
Asia offers great investment opportunities, especially if money flows from the US to this region. India's economic backdrop and environment provide excellent investment opportunities, as it has been one of the best performing equity markets and most stable economies in the past decade.
The Nomura Investment Forum Asia 2024 featured insights from Kwong Hong Huat of GIC on Japan’s resurgence in the equities market and from Vipul Mehta of Nomura Asset Management on the investment potential of India.
- Japan’s equity market is experiencing a structural upturn driven by widespread corporate governance reforms and a return of inflation, making it an attractive investment opportunity.
- India’s growing economy and stock market size present a unique investment opportunity, with the country expected to become the world’s third-largest economy by 2027.
- The Asia ex-Japan region offers significant growth potential for investors, especially as money flows back to the region from the US, with India accounting for a substantial portion of the MSCI Asia ex-Japan Index.
- The high-yield market in Asia is undergoing a structural shift away from real estate dominance, creating new opportunities for investors in higher-interest bonds with improving credit quality.
Japan’s comeback is attributed to reforms, increased profitability, and the exit from deflation, with expectations of sustained structural upturn.
India, seen as an attractive investment destination, boasts strong economic growth and market potential, making it a compelling opportunity for foreign investors. This signals a shift in focus towards Asia, particularly India, from the US market, which has dominated attention in recent years.
The perception of India as an expensive and high-risk market has kept foreign investors away, but it is the fifth largest economy and one of the largest stock markets, with many money-making opportunities and sufficient liquidity and diversity. Domestic investors have reaped the benefits, seeing positive flow every year except one over the last 10 years.
Foreign investors will have to come back to India as it offers a unique opportunity in terms of size, economy, population and potential for growth. India recorded GDP growth of over 8% last financial year, exceeding growth rates in the US and China, and is expected to become the world’s third-largest economy by 2027, with its GDP forecast to hit $7 trillion by 2030. India’s share in the MSCI Asia ex-Japan Index has increased from 8% in 2013 to 19-20% today, and foreign investors will have to keep pace with the market and come back.
Asia’s high-yield bonds present a promising opportunity for investors
The Asian high-yield market is undergoing significant changes, with a shift away from Chinese real estate dominance and towards improving credit quality among Asian issuers. This shift is creating new investment opportunities, reflected in the strong performance of the JP Morgan Asia non-investment grade index.
- The high-yield market in Asia is undergoing a structural shift away from real estate dominance, creating new opportunities for investors in higher-interest bonds with improving credit quality.
- The Asian high-yield market has shown significant recovery and strength, with a rise in new issuances and oversubscribed debt issues indicating strong investor demand.
- Various sectors and markets in Asia, including India and China, offer compelling opportunities for generating credit alpha, driven by stable macroeconomic backdrops and government measures to stabilize key sectors.
Factors supporting the outlook for Asian high-yield include stable political environments, strong credit fundamentals, and attractive yields compared to global credit markets. Specific opportunities exist in sectors like Asian financials, insurance debt, and the resilient Indian market. Government measures in China’s property and industrial sectors, as well as robust macroeconomic backdrops in regional markets like Malaysia, Indonesia, and the Philippines, are further contributing to the market’s recovery, growth, and resilience. Overall, the Asian high-yield market presents a unique turnaround story for investors seeking to capitalize on these evolving opportunities.
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