• Power sector: As a non-cyclical industry, we see value in the power sector amid the risk of a global growth slowdown. This will also be supported by China’s energy transition (e.g., solar projects, energy storage, electric vehicles).
• Oil Sector: Despite potential recession risks, oil producers will benefit from China’s reopening and the willingness of the members of the Organization of the Petroleum Exporting Countries and other countries that export crude oil (OPEC+) to further cut supply to support oil prices. Additionally, the US has followed through on plans to begin re-filling their petroleum reserves on dips in crude prices, which will help keep prices down.
• Transport sector: Revenge travel may intensify in 2023, especially with the return of Chinese tourists. Moreover, hybrid work arrangements will continue to boost traffic and encourage people traveling for work to extend their trips for leisure.
• Technology sector: Investment-grade (IG) tech is generally a defensive sector. It outperformed the IG index given the risk-off environment in 2022. We prefer higher-quality and less cyclical tech names with A and BBB ratings.

We also favor adding exposure to China credits as the country’s earlier-than-expected reopening and the government’s focus on economic growth, away from draconian COVID curbs, continue to boost risk sentiment for the region.

As for clients mostly looking for interest accrual, we recommend locking in yields for as long as possible while yields are near recent highs. Take advantage of US dollar investment grade credits with yields of at least 5%, which, we believe, is decent already for the next five to 10 years.