Market Overview

Asian Bonds Are The New Safe Havens


According to analysts at Aberdeen Asset Management, investors need to be looking at Asian bonds and currencies going forward. Researchers at the asset manager pointed to the fact that as the global equity markets have fallen, both bonds issued by Asian countries and their underlying currencies have stalwartly rallied higher.

Aberdeen forecasts that a basket of Asian currencies will appreciate by 3%-5% annually over next 5 years versus a basket of Western currencies. The firm cites the strong fiscal health of Asia's governments and that none face the pension liabilities of the west. Aberdeen believes that bonds issued by Asian governments, denominated in appreciating Asian currencies, are trading at yields that are “many multiples of the yields available on traditional risk free assets like US Treasuries.”

With Asia emerging from the global credit crisis almost unscathed, investors may want to seriously consider adding the sector to a fixed income portfolio.

The WisdomTree Asia Local Debt ETF (NYSE: ALD) offers a way for investors to directly profit from this trend. The ETF follows a basket of bonds from a host of countries including South Korea, Malaysia, Indonesia, China, and Australia. ALD currently yields 1.7%. Investors can also take a look at Aberdeen's own Asia-Pacific Income Fund (NYSE: FAX) which yields 5.8%.

For those who wish to bet on currency appreciation, the WisdomTree Dreyfus Indian Rupee (NYSE: ICN), WisdomTree Dreyfus Chinese Yuan (NYSE: CYB) and CurrencyShares Australian Dollar Trust (NYSE: FXA) are available to take advantage of the trend.


Related Articles (CYB + ALD)

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