INDEPENDENT ADVISORS | Staff Reporter, Singapore

APAC investors anticipate market pressures, growth slowdown

Here's the main risk to credit markets.

Asia-Pacific investor sentiment is coloured by expectations of pressure across all markets and that growth will slow, according to a new regional cross-sector investor survey by Fitch Ratings.

Here's more from Fitch:

APAC investors are concerned about reduced monetary easing by global central banks and its effect on credit conditions across the region. Eighty-seven percent of respondents regard a reduction in quantitative easing by major central banks as the main risk to APAC credit markets.

They specifically acknowledge Emerging Asia market pressures, with 79% expecting underlying credit conditions to deteriorate for emerging-market sovereigns, with 68% expecting the same for emerging-market corporates. A similar proportion of investors expect spreads in the two segments to widen.

Survey respondents anticipate slowing economic growth in many countries. The most pessimistic outlook was for India, followed closely by Indonesia.

Conversely, Japan's growth is expected to accelerate. Although 46% believe China is heading for a slowdown, only a third of investors expect this to be a hard landing and cause difficulties for the regional credit markets.

Investor sentiment is divided on the merits of high yield. Twenty percent voted it their top investment choice, just behind the favourite, corporates - but an even greater proportion say high yield is their least favoured sector.

Fifty-four percent say they will find the best yield opportunities in high-yield corporate bonds, strongly ahead of second-placed bank hybrid bonds. But views on high-yield fundamentals are weak, with two-thirds expecting deterioration.

Sentiment on corporates is overall negative. Fifty-six percent say property sector fundamentals will deteriorate, with 53% pessimistic on the outlook for industrials/manufacturing. Investors expect companies to focus on capex and maintaining prudent cash cushions ahead of shareholder-biased activities.

Fitch conducted its inaugural "APAC Senior Fixed-Income Investor Survey" between 20 August and 30 September. It represents the views of 72 senior investors in the APAC region, including asset-management companies, sovereign wealth funds, insurance companies, pension funds, wealth managers, banks and hedge funds.

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