Weighing the risks and opportunities in global corporate bonds 

For Pramod Shenoi, the Head of Financials of CreditSights Asia-Pacific Research, the outlook for the markets is generally “constructive”. It means positive or marked by stability and confidence.

It may be so, but a better understanding of trends and developments is necessary when plotting out a strategy for your offshore bond portfolio, so you know what opportunities corporate bonds offer as investments today.

In a recent briefing titled “2024 Philippine Market Outlook: Position for the Next Cycle”, Pramod shared his reasons for his “constructive” near-term outlook and the challenges, risks, and opportunities in corporate bonds that lie ahead.

Encouraging trends

On the US economy, Pramod said, “Growth has been significantly better than many had predicted. Is there going to be a hard landing? The data that has emerged has constantly been strong and has constantly surprised to the upside.”

While the timing of the rate cuts of the US Fed has definitely been pushed back, CreditSights expects 100 basis points (bps) of cuts this year.

He said China is also not as bad as everyone feared.

“We expect growth in 2024 to be underpinned by more effective implementation of macro policies, a smaller drag from the property sector, strong growth impetus from the rollout of local infrastructure stimulus, improving industrial production and manufacturing investment, decelerating but still resilient retail and services spending, additional policy rate cuts, and reduced geopolitical risks,” he said.

“We expect China to maintain a real GDP growth target of around 5.0% for 2024 and discuss structural reforms to boost private sector confidence and attract foreign direct investments,” he added.

Resilience in Asia

The growth in emerging markets will slow down a bit, but not for Asia.

Pramod said the recent numbers from the International Monetary Fund (IMF) show a strong Asia story. India is expected to grow the fastest, while the Philippines is number two, which, Pramod said, is “fantastic”.

“Inflation in Asia is broadly coming under control. If you look at Australia, Philippines, India, little jury is still out there, and there are lots of hawkish statements coming from central bank governors, but in Indonesia, for example, it’s at 2%, so very much under control,” he said.

As for oil prices, there is a lack of consensus in the Organization of Petroleum Exporting Countries (OPEC), and that has resulted in lower prices.

Global challenges

“Risks, though, are never really too far away,” said Pramod. “The economic impact of higher (rates) for longer (in the US), we haven’t seen yet, doesn’t mean that something unexpected doesn’t happen.”

He mentioned the Israel-Hamas war, which may get out of control, and the possibility of another Trump administration.

Will US-China relations take a turn for the worse? Will North Korea make a ruckus by firing a few missiles?

So far, the current trends paint a positive outlook for investors who may be looking to optimize their bond portfolios.

Opportunities abound

CreditSights and Metrobank have specific recommendations for investment grade and high yield corporate credits amid the macroeconomic circumstances. Our financial advisors can help you weigh secure investments like the Metrobank Corporate Bond Fund or the Metrobank Peso Retail Treasury Bonds so you can take advantage of emerging corporate bond opportunities.

If you wish to know more about what bonds hold promise, please get in touch with your relationship manager or investment counselor.

(Bookmark and visit Metrobank Wealth Insights at www.wealthinsights.ph daily for investment insights and ideas. If you are a Metrobank client, please get in touch with your relationship manager or investment specialist for assistance in accessing exclusive content. Not a client yet? Please sign up here so you can begin your wealth journey with us.)

ANTHONY O. ALCANTARA is the editor-in-chief of Wealth Insights. He has over 20 years of experience in corporate communications and has won various communication awards for his work in helping companies and individuals communicate with purpose, clarity, and creativity. He also has a master’s degree in technology management from the University of the Philippines. When not at work, he goes out on epic adventures with his family, practices Aikido, and sings in a church choir.