Asia outlook: 5 fixed-income themes for 2022

Following a volatile year in which Chinese defaults led Asia high-yield (HY) to its worst annual return since the financial crisis, and the state-led bailout of Huarong¹ was essential for the investment-grade (IG) market to recover, what comes next?

Covering macro and markets, our Asia fixed-income outlook for 2022 focuses on five themes:

• Lowflation to stagflation: sustained but contained inflation should accompany growth supported by cyclical factors, like inventory restocking, and structural drivers, such as improved productivity
• Treasuries: Federal Reserve actions will be crucial amid elevated inflation and continuing growth. We expect US yields to rise, especially in the intermediate section of the Treasury curve, due to stronger demand
• China macro: as property-sector weakness undermines growth, the authorities are likely to deploy fiscal and monetary stimulus in an effort to boost the economy. The ‘common prosperity’ agenda will support services and consumption
• Asia IG: Higher spreads and shorter duration will make Asia IG attractive, with corporates supported by recovering consumer demand, labour-market conditions and policy easing in China
• Asia HY: Following a year in which China property defaults totalling USD 50 billion drove the market to an 11% decline, we expect opportunities to arise given the greater stability in other countries and emergence of sectors like Indian renewable energy and telecommunications

To read our Asia Fixed Income 2022 outlook, please use the download button provided.

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