Latest news with #DavidChao
Time of India
3 days ago
- Business
- Time of India
If West Asia conflict spreads and oil pips $80, it will upset the apple cart for Indian & Asian equities: David Chao
David Chao , Global Market Strategist, Invesco Asia Pacific , says investors are heavily invested in US equities and the US dollar. There are better prospects in European equities and Asian credit . Fiscal and monetary stimulus in Europe, especially in Germany and the UK, should boost the equity market. Asian markets, particularly India, look promising if the US dollar weakens and oil prices stay low. How do you read the Fed policy outcome because Donald Trump has been demanding a 2.5% rate cut from the Fed. But the Fed verdict has been to keep the rates unchanged. How do you read this rate cut for now and the implications going ahead? David Chao: Certainly there was no surprise over the outcome of the FOMC meeting yesterday. The Fed's characterisation of the US economy remains roughly what it was six weeks ago, that the US economy is sound, but there are still concerns over what the tariffs may bring. Back in 2018, during the first tariff war, we did not really see any price level or inflationary impacts from the tariffs and that was because companies absorbed many of the tariffs instead of raising prices. But they also laid off some of their employees. So, the big question this time around as the tariffs continue to work their way through the system is, are consumers going to bear the brunt of it or will the suppliers and the stores do so? I am intrigued about the reaction of the world markets to what is going on in West Asia. They are shunning and ignoring all that is happening. The only market which is most sensitive right now is crude and rightfully so, but not equities. David Chao: Well, I think the equity market has retraced a lot of what it has lost since the Liberation Day and it reflects a continued risk-on sentiment. Now, the bond markets are a lot more wary of both the fiscal situation in the US and also the potential stagflationary winds that the US economy is facing. But we have just come out with our mid-year outlook and we are calling for diversification. We think that investors are overly exposed, overly concentrated in certain assets like the US equity market or even US dollar and we think brighter opportunities currently exist in European equities or in Asian credit. Would you want to detail where within Europe you find opportunities and, of course, Asia as well? David Chao: In Europe we continue to have greater fiscal stimulus in places like Germany, the UK, and also monetary stimulus. The ECB has recently cut rates. This further liquidity should boost the equity market. The defence spending addition that Germany has announced is likely to flow down to factories and materials, construction, and infrastructure. We broadly like European equities at these levels. In Asia, the only times that emerging markets have outperformed developed markets over the past 10-15 years has been when the US dollar is weakening, local central banks are cutting rates and oil is below $80 a barrel. So, it makes a good case for investors to stay invested in India. If the West Asia conflict spreads to a wider region and oil goes above $80 that could certainly upset the apple cart for Indian equities and for Asian equities. Live Events You Might Also Like: Markets in a sideways zone and looking at West Asia development, tariff deadline: Dipan Mehta When you talk about diversification, is it also about diversifying into other asset classes? Is it just a regional call or is it also an asset class call? David Chao: It means diversifying away from being overly concentrated and we know that foreign investors have been overly concentrated in US equities. The market cap concentration that US stocks have for MSCI Global Index is around 70-80%. The US economy is only around 20% of the global economy. I think reducing concentration, and looking at other places makes sense. I am not saying investors should be selling the US or that US assets are becoming less attractive, I just think that a broader diversification in one's asset allocation is a prudent measure, especially in these times of uncertainty. When we look at some of the big cues, then yes, the Iran-Israel conflict, that story is developing, the big event with Fed that is over now, but the upcoming event is the tariff deadline, maybe which we are approaching 9th of July. As we approach this date, do you believe that the markets can once again get jittery or the investors have digested that the worst is behind with respect to tariffs? David Chao: I think investors are a little too sanguine regarding the tariffs. I do not think that we are out of the woods yet on the tariffs. We were supposed to get a deal announced every single day during these 90-day reprieves. We only got three. It is unlikely that most countries will be able to sign deals before the deadline next month and that could mean more negative tariff headlines. But ultimately, I just want to remind everyone that tariffs are a near-term overhang that we are likely to move through later on in this year. That is when investors will start to focus on fundamentals, on growth, on corporate earnings. There are many bright spots in China, AI or Indian equities or European defence companies, or Asian credit, there are bright opportunities to be had. You Might Also Like: Long-term, India is the best story in the making: Anshul Saigal
New Straits Times
4 days ago
- Business
- New Straits Times
Malaysia scores record flows as bond investors favour Asia
SINGAPORE/BENGALURU: Bond investors fleeing the United States are finding a haven in stable and lucrative Asian debt markets, with Malaysia leading the pack as the destination for foreign money. Foreign ownership of government bonds from Indonesia to India is soaring, becoming a tailwind for markets that have traditionally been dominated by domestic players. "We're in a very good environment for Asian investments," said David Chao, global market strategist for Asia Pacific at Invesco. "The ingredients are in place for Asia, for emerging markets to outperform." The biggest appeal is the combination of monetary easing and currency appreciation they are offering for the first time in four years, precipitated by US President Donald Trump's policies and a weakening dollar. Malaysian bonds recorded their biggest monthly foreign inflows since 2014 last month, around US$3.15 billion. India and Indonesia also got significant inflows. Across Asia, low inflation and policy rates at their peak contrast with the United States, Europe or Japan, where fiscal profligacy has undermined the value of long-term debt. Subdued growth and expected rate cuts further enhance the appeal of locking in peak rates, with the potential for capital appreciation on bonds as yields decline. A weaker dollar also gives investors scope to profit from currency appreciation. "Emerging market assets fundamentally will do well when US rates are dropping, and US dollar is weakening," said Shah Jahan Abu Thahir, head of global markets for Southeast Asia at Bank of America. "The last few years, it was the now, anecdotally, there's definitely some interest potentially coming back." BOND ALLURE Data from regional regulatory authorities and bond market associations showed foreign investors bought US$34 billion worth of Asian debt securities so far this year - the largest amount in the first five months of a year since at least 2016. That's just the beginning of flows into these under-owned markets, analysts said, and likely to continue so long as economies and monetary settings in this part of the world remain insulated and more stable than developed markets. "We're seeing this fixed income interest across the board in the bigger and small EM countries - Thailand, Philippines, Indonesia and India," Sue Lee, head of markets for Asia South at Citi Group, said. India has been one of the more active markets for clients, due to the string of rate cuts, she said. Investors are positioning themselves ahead of expected rate cuts, locking in yields with the anticipation of bond prices rising as rates decline. Malaysia, where the market remains divided on rate-cut prospects, has an edge over Thailand, where investors reckon the cycle is almost over. Thailand had outflows of about US$53.6 million in May, as investors shunned a market with one of the lowest returns in the region and hit hardest by Trump's trade tariffs. The central bank has hinted it has limited room to cut rates further, while the government has said it wants a weaker currency. One-year bond yields are below the 1.75 per cent policy rate. Indonesian government bonds (IndoGBs) offer attractive yields, with a two-percentage point premium over US Treasuries on 10-year IndoGBs. However, concerns over government spending and political uncertainty have tempered investor enthusiasm. Investors say Malaysian bonds offer more value, with its central bank yet to start cutting rates despite weaker growth, and a relatively robust ringgit. Abu Tahir said bonds in Indonesia are regarded as expensive while Thailand has rate cuts priced in and is already at fair value. "It's about what's the expectation and what's the market pricing," he said, predicting Malaysia will cut rates in July, though the market is more divided. "So that's like where the value is because if everybody is expecting a cut, it's already been priced in," he said. The lack of liquidity in Asian bond markets has long been a constraint for investors, with rapid foreign capital flows capable of triggering price volatility. Last month, a rush of capital into Hong Kong caused a spike in its usually stable currency. But analysts say there is less cause for concern, given a benign inflation environment and low foreign ownership. "For the past five years, it's been tumbleweed in terms of portfolio inflows into the region, so actually it wouldn't be bad to see more inflows back into the region," said Claudio Piron, a strategist at Bank of America.
Business Times
4 days ago
- Business
- Business Times
Malaysia scores record flows as bond investors favour Asia
[SINGAPORE] Bond investors fleeing the United States are finding a haven in stable and lucrative Asian debt markets, with Malaysia leading the pack as the destination for foreign money. Foreign ownership of government bonds from Indonesia to India is soaring, becoming a tailwind for markets that have traditionally been dominated by domestic players. 'We're in a very good environment for Asian investments,' said David Chao, global market strategist for Asia Pacific at Invesco. 'The ingredients are in place for Asia, for emerging markets to outperform.' The biggest appeal is the combination of monetary easing and currency appreciation they are offering for the first time in four years, precipitated by US President Donald Trump's policies and a weakening dollar. Malaysian bonds recorded their biggest monthly foreign inflows since 2014 last month, around US$3.15 billion. India and Indonesia also got significant inflows. Across Asia, low inflation and policy rates at their peak contrast with the United States, Europe or Japan, where fiscal profligacy has undermined the value of long-term debt. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Subdued growth and expected rate cuts further enhance the appeal of locking in peak rates, with the potential for capital appreciation on bonds as yields decline. A weaker dollar also gives investors scope to profit from currency appreciation. 'Emerging market assets fundamentally will do well when US rates are dropping, and the US dollar is weakening,' said Shah Jahan Abu Thahir, head of global markets for South-east Asia at Bank of America. 'The last few years, it was the now, anecdotally, there's definitely some interest potentially coming back.' Data from regional regulatory authorities and bond market associations showed foreign investors bought US$34 billion worth of Asian debt securities so far this year – the largest amount in the first five months of a year since at least 2016. That's just the beginning of flows into these under-owned markets, analysts said, and likely to continue so long as economies and monetary settings in this part of the world remain insulated and more stable than developed markets. 'We're seeing this fixed income interest across the board in the bigger and small EM countries - Thailand, Philippines, Indonesia and India,' Sue Lee, head of markets for Asia South at Citi Group, said. India has been one of the more active markets for clients, due to the string of rate cuts, she said. Investors are positioning themselves ahead of expected rate cuts, locking in yields with the anticipation of bond prices rising as rates decline. Malaysia, where the market remains divided on rate-cut prospects, has an edge over Thailand, where investors reckon the cycle is almost over. Thailand had outflows of about US$53.6 million in May, as investors shunned a market with one of the lowest returns in the region and hit hardest by Trump's trade tariffs. The central bank has hinted it has limited room to cut rates further, while the government has said it wants a weaker currency. One-year bond yields are below the 1.75 per cent policy rate. Indonesian government bonds (IndoGBs) offer attractive yields, with a two-percentage point premium over US Treasuries on 10-year IndoGBs. However, concerns over government spending and political uncertainty have tempered investor enthusiasm. Investors say Malaysian bonds offer more value, with its central bank yet to start cutting rates despite weaker growth, and a relatively robust ringgit. Abu Tahir said bonds in Indonesia are regarded as expensive while Thailand has rate cuts priced in and is already at fair value. 'It's about what's the expectation and what's the market pricing,' he said, predicting Malaysia will cut rates in July, though the market is more divided. 'So that's like where the value is because if everybody is expecting a cut, it's already been priced in,' he said. The lack of liquidity in Asian bond markets has long been a constraint for investors, with rapid foreign capital flows capable of triggering price volatility. Last month, a rush of capital into Hong Kong caused a spike in its usually stable currency. But analysts say there is less cause for concern, given a benign inflation environment and low foreign ownership. 'For the past five years, it's been tumbleweed in terms of portfolio inflows into the region, so actually it wouldn't be bad to see more inflows back into the region,' said Claudio Piron, a strategist at Bank of America. 'In a way, if it's done in a calibrated, natural way, it may not be bad. A good problem to have.' REUTERS
The Star
4 days ago
- Business
- The Star
Malaysia scores record flows as bond investors favour Asia
SINGAPORE/BENGALURU: Bond investors fleeing the United States are finding a haven in stable and lucrative Asian debt markets, with Malaysia leading the pack as the destination for foreign money. Foreign ownership of government bonds from Indonesia to India is soaring, becoming a tailwind for markets that have traditionally been dominated by domestic players. "We're in a very good environment for Asian investments," said David Chao, global market strategist for Asia Pacific at Invesco. "The ingredients are in place for Asia, for emerging markets to outperform." The biggest appeal is the combination of monetary easing and currency appreciation they are offering for the first time in four years, precipitated by U.S. President Donald Trump's policies and a weakening dollar. Malaysian bonds recorded their biggest monthly foreign inflows since 2014 last month, around $3.15 billion. India and Indonesia also got significant inflows. Across Asia, low inflation and policy rates at their peak contrast with the United States, Europe or Japan, where fiscal profligacy has undermined the value of long-term debt. Subdued growth and expected rate cuts further enhance the appeal of locking in peak rates, with the potential for capital appreciation on bonds as yields decline. A weaker dollar also gives investors scope to profit from currency appreciation. "Emerging market assets fundamentally will do well when U.S. rates are dropping, and U.S. dollar is weakening," said Shah Jahan Abu Thahir, head of global markets for Southeast Asia at Bank of America. "The last few years, it was the now, anecdotally, there's definitely some interest potentially coming back." BOND ALLURE Data from regional regulatory authorities and bond market associations showed foreign investors bought $34 billion worth of Asian debt securities so far this year - the largest amount in the first five months of a year since at least 2016. That's just the beginning of flows into these under-owned markets, analysts said, and likely to continue so long as economies and monetary settings in this part of the world remain insulated and more stable than developed markets. "We're seeing this fixed income interest across the board in the bigger and small EM countries - Thailand, Philippines, Indonesia and India," Sue Lee, head of markets for Asia South at Citi Group, said. India has been one of the more active markets for clients, due to the string of rate cuts, she said. Investors are positioning themselves ahead of expected rate cuts, locking in yields with the anticipation of bond prices rising as rates decline. Malaysia, where the market remains divided on rate-cut prospects, has an edge over Thailand, where investors reckon the cycle is almost over. Thailand had outflows of about $53.6 million in May, as investors shunned a market with one of the lowest returns in the region and hit hardest by Trump's trade tariffs. The central bank has hinted it has limited room to cut rates further, while the government has said it wants a weaker currency. One-year bond yields are below the 1.75% policy rate. Indonesian government bonds (IndoGBs) offer attractive yields, with a two-percentage point premium over U.S. Treasuries on 10-year IndoGBs. However, concerns over government spending and political uncertainty have tempered investor enthusiasm. Investors say Malaysian bonds offer more value, with its central bank yet to start cutting rates despite weaker growth, and a relatively robust ringgit. Abu Tahir said bonds in Indonesia are regarded as expensive while Thailand has rate cuts priced in and is already at fair value. "It's about what's the expectation and what's the market pricing," he said, predicting Malaysia will cut rates in July, though the market is more divided. "So that's like where the value is because if everybody is expecting a cut, it's already been priced in," he said. The lack of liquidity in Asian bond markets has long been a constraint for investors, with rapid foreign capital flows capable of triggering price volatility. Last month, a rush of capital into Hong Kong caused a spike in its usually stable currency. But analysts say there is less cause for concern, given a benign inflation environment and low foreign ownership. "For the past five years, it's been tumbleweed in terms of portfolio inflows into the region, so actually it wouldn't be bad to see more inflows back into the region," said Claudio Piron, a strategist at Bank of America. "In a way, if it's done in a calibrated, natural way, it may not be bad. A good problem to have." - Reuters
Yahoo
4 days ago
- Business
- Yahoo
Analysis-Malaysia scores record flows as bond investors favour Asia
By Johann M Cherian, Gaurav Dogra and Rae Wee SINGAPORE/BENGALURU (Reuters) -Bond investors fleeing the United States are finding a haven in stable and lucrative Asian debt markets, with Malaysia leading the pack as the destination for foreign money. Foreign ownership of government bonds from Indonesia to India is soaring, becoming a tailwind for markets that have traditionally been dominated by domestic players. "We're in a very good environment for Asian investments," said David Chao, global market strategist for Asia Pacific at Invesco. "The ingredients are in place for Asia, for emerging markets to outperform." The biggest appeal is the combination of monetary easing and currency appreciation they are offering for the first time in four years, precipitated by U.S. President Donald Trump's policies and a weakening dollar. Malaysian bonds recorded their biggest monthly foreign inflows since 2014 last month, around $3.15 billion. India and Indonesia also got significant inflows. Across Asia, low inflation and policy rates at their peak contrast with the United States, Europe or Japan, where fiscal profligacy has undermined the value of long-term debt. Subdued growth and expected rate cuts further enhance the appeal of locking in peak rates, with the potential for capital appreciation on bonds as yields decline. A weaker dollar also gives investors scope to profit from currency appreciation. "Emerging market assets fundamentally will do well when U.S. rates are dropping, and U.S. dollar is weakening," said Shah Jahan Abu Thahir, head of global markets for Southeast Asia at Bank of America. "The last few years, it was the now, anecdotally, there's definitely some interest potentially coming back." BOND ALLURE Data from regional regulatory authorities and bond market associations showed foreign investors bought $34 billion worth of Asian debt securities so far this year - the largest amount in the first five months of a year since at least 2016. That's just the beginning of flows into these under-owned markets, analysts said, and likely to continue so long as economies and monetary settings in this part of the world remain insulated and more stable than developed markets. "We're seeing this fixed income interest across the board in the bigger and small EM countries - Thailand, Philippines, Indonesia and India," Sue Lee, head of markets for Asia South at Citi Group, said. India has been one of the more active markets for clients, due to the string of rate cuts, she said. Investors are positioning themselves ahead of expected rate cuts, locking in yields with the anticipation of bond prices rising as rates decline. Malaysia, where the market remains divided on rate-cut prospects, has an edge over Thailand, where investors reckon the cycle is almost over. Thailand had outflows of about $53.6 million in May, as investors shunned a market with one of the lowest returns in the region and hit hardest by Trump's trade tariffs. The central bank has hinted it has limited room to cut rates further, while the government has said it wants a weaker currency. One-year bond yields are below the 1.75% policy rate. Indonesian government bonds (IndoGBs) offer attractive yields, with a two-percentage point premium over U.S. Treasuries on 10-year IndoGBs. However, concerns over government spending and political uncertainty have tempered investor enthusiasm. Investors say Malaysian bonds offer more value, with its central bank yet to start cutting rates despite weaker growth, and a relatively robust ringgit. Abu Tahir said bonds in Indonesia are regarded as expensive while Thailand has rate cuts priced in and is already at fair value. "It's about what's the expectation and what's the market pricing," he said, predicting Malaysia will cut rates in July, though the market is more divided. "So that's like where the value is because if everybody is expecting a cut, it's already been priced in," he said. The lack of liquidity in Asian bond markets has long been a constraint for investors, with rapid foreign capital flows capable of triggering price volatility. Last month, a rush of capital into Hong Kong caused a spike in its usually stable currency. But analysts say there is less cause for concern, given a benign inflation environment and low foreign ownership. "For the past five years, it's been tumbleweed in terms of portfolio inflows into the region, so actually it wouldn't be bad to see more inflows back into the region," said Claudio Piron, a strategist at Bank of America. "In a way, if it's done in a calibrated, natural way, it may not be bad. A good problem to have." Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
