The world’s biggest asset managers are hiring bond traders and analysts in Singapore as more global capital shifts to Asia, where economies growing fivefold the pace of advanced nations are improving creditworthiness.
BlackRock Inc., the largest money manager, has made the city-state its primary trading center for the region’s debt and currencies, while Manulife Asset Management, a unit of Canada’s largest insurer, established a complementary fixed-income base to that in Hong Kong. Aberdeen Asset Management Plc expanded its Asia fixed-income staff by about 20 percent in the year through June to 17. Western Asset Management Co., part of Baltimore-based Legg Mason Inc., has plans to hire more people.
Singapore, home to the highest proportion of millionaire households in the world, is attracting global financial firms after retaining its no. 2 place behind Switzerland among the most competitive economies ranked by the World Economic Forum. Asia’s dollar bonds and local-currency notes returned 10 percent and 5.7 percent, respectively, this year, HSBC Holdings Plc data show. Investors earned 2.6 percent on U.S. Treasuries, 4 percent on German bunds and 1.6 percent on Japan’s debt, Bank of America Merrill Lynch indexes show.
“Quite recently, our Asian fixed-income capability was quite underdeveloped and so the decision was made to try to build a world-class capability,” Mark McCombe, the Hong Kong-based Asia-Pacific chairman at BlackRock, which oversees $1.3 trillion of debt globally, said in an interview on Sept. 6. “The regulatory framework, the living and working environment as well as the kind of rich base of investors make Singapore a very attractive place to do business.”
‘An Upside-Down World’
Indonesia and South Korea had their debt ratings raised this year by Moody’s Investors Service and the Philippines was upgraded by Standard & Poor’s as the International Monetary Fund forecast Asia’s emerging-market economies will expand 7.1 percent in 2012, beating an estimated 1.4 percent increase for developed countries and a 3.4 percent gain for Latin America. Moody’s said on Sept. 11 it may join Standard & Poor’s in downgrading the Aaa rating for the U.S.
“Historically, emerging-market sovereigns were predominantly viewed as credit risks,” said Chia-Liang Lian, Singapore-based head of investment management for Asia at Western Asset. “Today, following negative rating actions, many developed markets are now viewed from a credit-risk perspective. Western Asset describes this as an upside-down world. Over time, this suggests a growing sponsorship from investors who didn’t have an allocation to emerging markets.”
While financial firms are expanding in Asia, jobs are declining in London. Vacancies at financial-services companies in the British capital fell by more than a third in July from a year earlier amid Europe’s debt crisis, recruitment firm Astbury Marsden said last month. Investment bankers in the U.K. favor working in Singapore over New York and London, where they face lower wage growth and higher taxes, according to the recruiter.
Record-low yields in developed nations are encouraging investors to seek higher returns in Asia, according to BlackRock, Manulife and Aberdeen Asset. Ten-year U.S. Treasuries yielded 1.75 percent today and similar-maturity German bunds paid 1.62 percent yesterday, compared with 5.93 percent in Indonesia, 4.87 percent in the Philippines and 3.49 percent in Malaysia, according to data compiled by Bloomberg.
International funds added $23 billion so far in 2012 to holdings of government debt in Thailand and 13.8 trillion rupiah ($1.4 billion) in Indonesia, official data show. Foreigners poured a net $11 billion into Malaysia’s bonds this year as of July 31 and $3 billion into South Korean notes as of Aug. 31. Emerging-market funds took in more than $32 billion in inflows this year through Sept. 5, nearly double the $17.3 billion for all of 2011, data from research firm EPFR Global show.
Growth in the 10-member Association of Southeast Asian Nations, known as ASEAN, is poised to accelerate, boosting currencies and fueling consumer and property booms, as the region’s cheaper and expanding labor pool attracts investment, according to Bank of America Merrill Lynch.
The Philippine labor force will rise almost 18 million, or 31 percent, to 75 million by 2020 from 2010, the second-biggest U.S. lender projected in an April 27 note. Jobs in Malaysia will grow 19 percent to 22 million. Indonesia will see an 11 percent gain to 180 million, according to the bank.
‘Bullish on ASEAN’
“Increasingly, European and North American investors will look for attractive yields in Asian markets and we believe having a very solid fixed-income capability underpins that,” said McCombe, who was chief executive officer in Hong Kong at HSBC before joining BlackRock in January. “Places like the Philippines, Indonesia and Malaysia are in a good structural position with low levels of debt and young workforce. We’re quite bullish on the ASEAN region.”
The Singapore dollar led gains among Asia’s 11 major currencies this year with its 5.6 percent appreciation, followed by the Philippine peso’s 5.1 percent and the Malaysian ringgit’s 3 percent, according to data compiled by Bloomberg.
The cost of insuring Philippine sovereign bonds using five-year credit-default swaps fell 72 basis points this year to 120 yesterday and Indonesia’s slumped 62 basis points to 146, according to data provider CMA. That on Malaysia’s debt also fell 64 basis points, or 0.64 percentage point, to 82. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent if a government fails to adhere to its debt agreements.
BlackRock’s Asian Tiger Bond Fund, which was run from New York earlier, is now managed from Singapore by Joel Kim and Neeraj Seth, according to McCombe. The fund returned 10.6 percent this year, exceeding the 6.7 percent gain among its peers, according to data compiled by Bloomberg.
Kim, who came from ING Investment Management, joined the U.S. firm in November to become its head of Asia-Pacific fixed income, a newly created role. BlackRock said it has an Asian debt-investment team of 22 people, excluding those in Japan and Australia. BlackRock also plans to start a separate dealing desk later this year in Singapore to service regional and global investment teams.
Manulife’s Asian bond portfolio manager Endre Pedersen moved to Singapore from Hong Kong in July. Regional debt funds managed by the firm have grown to $37 billion from $29 billion a year ago, prompting it to hire six fixed-income professionals this year, boosting staff comprising portfolio managers and analysts to 41 in the region outside of Japan, said Pedersen.
‘Closer to Markets’
“You will see us expanding,” he said. “We obviously see the importance of Singapore and the other ASEAN countries and the only way to serve that better is to grow our presence to have a point-of-contact closer to the markets.”
Manulife’s Asia Total Return Bond fund returned 8.9 percent this year, beating a 5.8 percent gain among peers, Bloomberg data show. It holds more corporate debt than recommended by the benchmark it follows, according to Pedersen.
“We are overweight on the credit side,” said Pedersen. “The key is to make sure one is getting high enough income because people will continue to see more and more investors chasing the same markets.”
Western Asset will expand its Asian bond trading team as increasing fund inflows into the region boost business, said Lian, who moved from Pacific Investment Management Co. a year ago to replace Rajeev De Mello, who transferred to Schroders Plc. He hired five people in the past months to strengthen his investment team.
Western Asset sourced about $11.2 billion of its global funds from Asia excluding Japan as of June 30, an increase of 31 percent since 2010, the company said. Aberdeen Asset’s Aberdeen Local Currency Short Duration Bond fund grew to $1.05 billion last month from $13 million when it was launched in March 2011, according to data provided by the company.
“We have been gradually adding to our team as our funds under management and product range grow,” said Anthony Michael, Aberdeen’s regional head of fixed income in Singapore.