UBS Top Flow Fund Manager Contrarian "Bottom Fishing": Increasing holdings of "Oversold" Asian junk bonds

In the recent market volatility caused by tariff policies, a top Asian junk bond investor chose to increase holdings in such bonds. The investor believes that with a decrease in default events and expectations of easing trade tensions, the outlook for the Asian junk bond market is good. Raymond Gui, head of Asian fixed income portfolio management at UBS Asset Management Limited, said, "We are optimistic about the overall performance of the Asian high-yield bond market in 2025." Last year, Raymond Gui's investment performance outperformed 98% of his peers. He noted, "Compared to previous years, default rates are lower than expected, and the direct impact of tariffs on credit fundamentals is limited, these factors are expected to be important support for the medium-term market performance." According to data, the UBS Asian High Yield USD Bond Fund managed by Raymond Gui had a return of approximately 16% last year, far exceeding the average return of 9% for other junk bond funds. Although the market is generally concerned that Trump's tariff policies may impact export-oriented Asian economies, many Asian high-yield bond issuers are relatively less affected as they rely more on domestic markets. In addition, investors also expect that after experiencing the debt crisis of Chinese real estate developers, the debt default rate in Asia will decrease. Chinese real estate developers used to be important participants in the Asian market. Raymond Gui stated that the company's cautious positioning strategy has enabled it to seize market opportunities and added to "some oversold" Asian high-yield bonds last week as planned. He also added that while the Asian market has indeed been affected by recent global sell-offs, looking at performance so far this year, the Asian market has not significantly lagged behind. Raymond Gui had previously stated at the end of March that he was "very optimistic" about the Asian junk bond market and planned to buy on dips during market pullbacks. Last week, Asian high-yield USD bonds fell by 3.3%, marking the largest weekly decline since September 2022, far exceeding the 0.7% decline in US and European counterparts. However, year-to-date, Asian high-yield USD bonds have only declined by 0.1%, while US and European counterparts have declined by 0.5% and 0.7%, respectively. However, some market participants remain cautious about lower-rated Asian junk bonds. Credit strategists from Goldman Sachs Group, Kenneth Ho and others, stated in a report on April 12 that they maintain a defensive stance and prefer to invest in Asian investment-grade bonds rather than speculative-grade bonds.