KUALA LUMPUR (Jan 24): Fixed income assets are starting to pique investors’ interest again as the market expects this type of longer duration asset class to benefit from global interest rates pivoting lower this year, according to OCBC chief economist Selena Ling.
While many are still keen on equities, more sophisticated investors are beginning to look back at fixed income assets, which just recently underwent a price shock in 2022-2023 due to the sharp rise in global interest rates at the time.
“Our client polls do suggest that people are feeling a little bit more optimistic, at least on the investment climate side of things. Despite their main concern being geopolitical issues, people are quite keen on equities,” she told reporters at a press briefing on Wednesday.
“For myself, it's a lot clearer. If we are moving from a global monetary policy tightening cycle to a global monetary policy easing cycle, then you should be in fixed income at once. It's kind of like a no-brainer.
“We are starting to see a lot of the more sophisticated investors, institutional clients, and some of the sovereign wealth funds and central banks starting to lengthen duration because they think that when rates come off, you are going to get a payback from being long duration or being overweight in bonds,” she added.
Ling noted that there is a rising trend that investors are favouring perpetual debt papers, which were hit hardest when the US Federal Reserve raised interest rates steeply over the past two years.
“We start to see issuances like perpetuals. Perpetuals have been out of favour for so long, because when rates were rising, [they] took the biggest hit, [but] we have seen a few perpetuals come back [and] the reception has been quite strong.
“Those that are now trading in the secondary market are actually trading higher. I think people are very convinced that this is the turn of the cycle, and the interest rate easing will benefit fixed income at once. Of course, you should have a diversified portfolio,” she said.