Pictured: Luke Ng, senior VP of research at FE Advisory Asia
Fund managers have not reached consensus on the outlook for yield products, which includes bond proxies such as dividend stocks and real estate investment trusts (REIT), as well as high yield bonds.
Firms are sending contradictory messages.
Asian investors still seem to be hunting for yield, as evidenced by the income-focused funds recently launched in Hong Kong by HSBC Global Asset Management and BEA Union Investment.
On the other hand, J Safra Sarasin said it has shifted from the hunt-for-yield strategy and now favours value stocks in emerging markets.
Goldman Sachs Asset Management is also wary. The firm believes the higher interest rate environment driven by the US is set to hit corporate credit, although REITs are more likely to ride the volatility over the long-term.
Luke Ng, senior VP of research at FE Advisory Asia (pictured above), believes some yield products, such as property stocks, could become more volatile as interest rates rise.
He points out that Asia-Pacific property stocks and REITs generally have a decent level of yield, and serve well as a portfolio diversifier thanks to the low correlation versus global equities and fixed income.
“The property markets in Asia tend to be quite localised. These stocks have benefitted from a low interest rate environment in the past, but relative to developed markets, they offer better long-term growth potential with higher volatility.”
Given this backdrop, Ng provides a comparative analysis of the Eastspring Asian Property Securities Fund and the Henderson Asia Pacific Property Equities Fund.