Asia Credit Strategy:Switches for Asia Credit After UK's Leave Vote
摘要： Asia'screditspreadisstillnotwideenough:Asia'screditspreadwasclosetoyear-to-datetightsandthepastfivey
Asia'screditspreadisstillnotwideenough:Asia'screditspreadwasclosetoyear-to-datetightsandthepastfiveyears'tightsbeforethereferendum.ThewideningwesawinthepastfewdaysonlybroughtusbacktothewideswesawinApril(seeExhibit1).
ThreereasonswhywearestillUWonAsiacredit:WehavebeenUWonAsiacreditsinceAprilduetoweakeningtechnicalsandrichvaluations.WithAsia'screditspreadbacktoApril'slevel,wedon'tseeanygoodreasontodrasticallychangeourview.TherearethreekeydriversofwhywearestillcomfortabletobeUWAsiacreditandwetrytolookbeyondtheUK'sdecisiontoleavetheEU:
1)Valuationremainsrichandisnotpricingindownsiderisktogrowth;
2)WeseesupplyriskfromChinaHYfollowinglimitedsupplyyear-to-date;
3)Thehighdollarpricemakesithardforspreadstotightenfurther.
TherisktoourcallisstrongtechnicalinflowsintoAsiacredit:Wehavetoadmitthatwedidn'tgetourtechnicalsviewrightinApril.Whileourexpectationofweakeronshoretechnicalsupportmoreorlessplayedout,weunfortunatelyunderestimatedtheinflowstoassetmanagersandinsurance. Weexpectflowsintobothassetmanagersandinsurancetoweakenin2H16andonshoredemandtoremainweak. OurtopthreeswitchideasinAsiacredit:DespiteourUWcallonAsiacredit,webelievethatinvestorscanmakeswitchesintheirportfoliostopickupvalueandmoveintosectorsorassetclassesthatofferamoreattractiverisk/reward.Belowwelistourtopthreeswitches:
1)SwitchoutofAsiaHYcorpsintoAsiaIGcorps;
2)SwitchoutChinabanksseniorsintoChinaleasing;
3)SwitchoutofAXJcreditwithhighexposuretotheUKanddevelopedEurope
Asia,to,screditspreadisstillnotwideenough,screditspreadwasclosetoyear,datetightsandthepastfiveyears
