Let's bringing our guest and it's and it who's head of fixed income research at UBP. So we've we had an improvement from the June lows too, about four or five days ago. In corporate credit in the United States, we had spreads coming in. Seemed like a pretty good environment. The one problem with corporate credit in Asia, I would think lots of issues, but the strong dollar. How much is the strong dollar leading to outflows in UH in
corporate credit in Asia? Well, basically we've been seeing outfloats throughout the year on the emerging market side, including Asia, and that's actually it's one of the factors been affecting the credit spreads here in Asia. Corporate credit. UM, we've been actually seeing moderate to float so far for the lost UM a few weeks to about like a month, and give a strong dollar, it's going to continue. We
reckoned that, um, the outfloats would may pick up again. However, I think, you know, substantially some of the outdoors has been sort of you know, being taken away UM during the year, So I would say, um, the movement at the moment could be more moderated than before. And that definitely you know, UM, you've substantially higher in terms of dollar here, it could as an impact, but I think it should be sort of moderated going forward. Where's the
best opportunity that you see right now in Asian corporate credit? Okay? Um, given we are still in a writing rate environment, so we need to be cautious and defensive in Asia credit. So what we are trying to do will we will look at high grade names and also focus on the quality.
The main reason that we go for high grades because in writing rate environment, higher credits generally will be more affected because some of the issues that would we could balance it and they are with higher leverage, so their
credit spread wordwide don't now because people worry about their earnings. Um. At the same time, we'll keep our duration short because now we've got an inverted your curve, isn't it like the two years is actually higher than ten years and people just don't got compensated by taking rids on the ten year side. So we we stress the importance of
short duration. In the corporate credit side. We definitely prefer quality names in the corporate perpetual bonds simply because the credit differential between senior and corporate perpetual has wide enough, which um, we look it looks attractive at the moment. However, we will focus on short core dates and also with
high coupon reset. We're not particularly a big fan of fixedful life at the moment, so we prefer the high coupon reset in which the issue would have a better chance of calling the paper if they need to during the core days. So the other things we like. Yeah, this is mostly for institutional investors. Retail investors sometimes a little bit cut off from access to corporate credit like this.
Are there e t f s for instance throughout Asia that give that access at the moment, they can also look at some of the e t F But I would say even for individual investor, they do will be able to look at some of the corporate credits because some of them are actually available in the market. But
of course, you know, people get minimum something like that. Yeah, but of course they can also look at some of the gt F funds definitely, Yeah, that's also available and also provide them with some sort of diversification as well. When we look at what happened yesterday with the cut to the LPR from the banks, I mean that was very much reflected in the equity market, but perhaps not as much in the bond market. Tell us, I guess
your concerns here about the China property space. Okay, Basically, I think at the moment people are still you know, need time to restore their confidence in the property market because what they are PHAs and would be have been you know, various headlines. Some sort of defaultebrates has been increasing as well, and people do worry about the restructuring
process for some of the defaulted issuer. So I think at the moment, people still need to see some of the measures that the come that come you know, come up by the government, whether it would be effective like for example, recently, as you mentioned, you know, cutaining of all those raids and at the same time they try to make sure that some of the presold project could be delivered to home by Yes. So I think, you know, all these measures are positive, but at the same time,
people need to monitor closely. I think people need to watch, you know, how the restructuring um would be for somewhat default to issue us. So I think that would be something that people would monitor closely. In looking at you know, the big macro picture, we are in a phase coming up of quantitative tightening after a long period of quantitative easing UM setting aside China, of course, but for the
most part that that's the case. So well, QT, I mean, if QUI pushed people into risky assets, will QT push them into a lot safer assets? And what might that be? I mean, would it likely be quality stocks or or investment grade credit? What? What do you think people would be looking at? Cash? Yeah, okay, cash is an alternative, But at the same time, people do need to invest right because the inflation is also high. It's also coming up.
So what people should look at would be UM on a defensive strategy, go for high grade you know, park their money to the short end, and if the market turn around then they can always liquidate you know, short end uh bonds very easily, and you know, like go into something risky. But at the moment, we emphasize on the fact that be defensive, go for high grade short data. You're saying this rising recession risk, we're looking ahead to Jackson Hole. What are you expecting there in terms of
I guess more of a hawkish statement. Well, okay, at this stage, I think you know anything that they talk about any indications about inflation, writs of recession. I think that would be you know, a very good indicator to the investor. Um our house wheel. Basically it's reckoned that the reception riceless rising you know in the d M market. At the same time, inflation may not peat yet. So I think all these will definitely you know, affect the
sentiment as well as risk appetite from the investor. Okay, big question just overall again, you know, we always have this nervousness before a FED meeting or in this case Jackson hole, does it clear next week after this is done? Well, really depending on what you know, fact is going to deliver. If they're delivering something that is expected, I guess the market would be able to sort of stabilize a bit.
But if they delivered something that's you know, unexpected or being too hockey ish, I think the market you know, could um you know, have a different strategy going forward. And it's a great heavie with us. Thank you for coming into our Hong Kong studio and it's as hip as head of Fixed Income Research Asia at UVP with us in Hong Kong,