Returns from Asian US dollar bonds to halve
Total returns on Asian US dollar bonds are expected to halve to 4 per cent this year, in effect marking the end of the 'dream run' seen since 1999, according to a report by ING Financial Markets.
Falling United States treasuries, limited value in credit spreads - the difference between yields on US treasuries and yields on Asian dollar bonds - and competition from other asset classes would all contribute to the lower growth, the investment bank said.
By choosing their investments well, savvy investors could still generate returns of up to 15 per cent in the coming year, according to Damien Wood, ING's head of credit research for Asia. This would be equal to the annualised return on the JP Morgan Asia Credit Index last year and only marginally below the 16 per cent reached in 1999,
'Since 1999, an Asian US dollar bond investor could have bought just about any basket of bonds and generated a healthy annual return. To get double-digit returns in 2004, however, adept bond selection and timing will be critical,' ING said.
ING's top recommendations are South Korea's Hana Bank, Chinese power generator AES China, Equitable-PCI Bank of the Philippines, Philippine sovereign bonds and Indonesian mining company Aneka Tambang.