Aberdeen Asset Says Asian Bond `Mispricing' Is an Investment Opportunity

Asian debt markets offer investors “tremendous opportunities” because the region’s bonds are priced as though they are as risky as emerging-market securities, according to Aberdeen Asset Management Plc.

“There is still a perception that Asia is part of a larger emerging-market universe, with all the contingent risk that used to imply,” Anthony Michael, head of Asia-Pacific fixed-income, said in an e-mailed report today. “If you make the effort to understand the market idiosyncrasies, you can exploit the mispricing which results.”

The average extra yield investors demand to hold Asian corporate bonds denominated in U.S. dollars rather than Treasuries rose to 3.2 percentage points last week, the highest since March 10, according to JPMorgan Chase & Co.’s Asia corporate bond index. The average emerging-market corporate bond spread has declined 13.6 basis points to 3.14 percentage points since May 6, JPMorgan’s Corporate Emerging Market Bond Index shows. A basis point is 0.01 percentage point.

Aberdeen has more than $259.3 billion of assets under management globally.

Asian fixed income has been “under-represented” in portfolios even though the region’s markets offer international investors “diversification and return enhancement,” said Michael, who is based in Singapore. The region has “superior fundamentals” and there is “sheer variety, with countries rated from triple A to sub-investment-grade.”

The credit outlook for the region looks positive with Asia likely to lead global growth for years to come, Michael said. Asian economies are expected to expand 6.9 percent this year after growing 3.5 percent last year, according to International Monetary Fund forecasts.

To contact the reporter on this story: Shelley Smith in Hong Kong at ssmith118@bloomberg.net

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