Halister News

(Bloomberg) -- Manulife Asset Management likes sovereign bonds in Indonesia and Malaysia, where monetary policies are accommodative, and hopes to be among first foreign financial institutions granted direct access to China’s interbank bond market.

• “We are overweight in Indonesia and Malaysia bonds which offer attractive carry and potential for further price appreciation,” fixed income portfolio manager Neal Capecci says in interview
  • “I’m not comfortable buying local bonds in Korea and Taiwan, where yields are low and risk-rewards aren’t that great”
• Malaysia
  • Govt bond yields are attractive on a relative basis to sovereign credit rating, also given BNM’s surprise rate cut and likelihood it will keep monetary policy accommodative
  • NOTE: BNM cut overnight policy rate to 3.0% on July 13
  • Favors long end of Malaysia’s yield curve
• Indonesia
  • Bank Indonesia will probably continue easing monetary policy to support economy after 4 rate cuts this year
  • Holds Indonesia govt bonds across the curve
• China
  • Manulife has applied for direct access to China’s interbank bond market in addition to having QFII quota
  • “We are eagerly waiting to hear back for our application to be approved as we would like to be the first ones to utilize this method to invest onshore”
  • NOTE: PBOC said earlier this year it is opening interbank bond market to more overseas investors
  • Onshore govt bonds offer attractive yields with liquid market; traditionally exhibits low correlation to other global bond markets
  • Yuan likely to maintain slow, measured path of depreciation vs dollar
• No reason to own Korean or Taiwan local currency bonds; 10- yr notes yield less than U.S. treasuries and the currencies are likely to weaken
• Fed committed to normalizing monetary policy, likely to resume rate hikes
• NOTE: Manulife Global Asia Total Return Fund has returned 8.22% this year, beating 69% of its peers, according to data compiled by Bloomberg