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2021 was another year of twists and turns as we marked the end
of the second year of the Covid-19 pandemic. We witnessed the
emergence of the Delta variant (followed now by Omicron), chaotic
upswings and crashes of cryptocurrencies, inflationary pressures
with world economies rebounding (as we increasingly learned to live
with Covid), as well as the unfolding of the real estate crisis in
China in the later stages of the year.
Equity markets rallied - the EMIX All World index returned
18.18% year-on-year as of 31 Dec 2021 - as the bulls took centre
stage. To combat inflation amidst buoyant market sentiments, the
Federal Reserve and central banks around the world began to draw up
countermeasure plans, including expectations of rate hikes in 2022.
The iBoxx TIPS Inflation-Linked Index ended the year with nominal
returns of 5.91%, while the iBoxx US Treasuries index returned
-2.47%.
In Asian fixed income, the iBoxx Asian Local Bond Index
(unhedged in USD) ended the year on a positive note as it returned
0.55% over December, even though it recorded a loss of -3.18% for
the full year. China Onshore and Indonesia were the standout
performers for 2021 as they returned 5.72% and 4.83% year-on-year,
respectively. Thailand (-4.35%) and Singapore (-4.06%), were the
worst performers.
In local currency terms for December, both China Onshore and
China Offshore saw gains across the yield curve. The highest gains,
however, were seen in the 10+ maturity segments of Hong Kong
(1.27%) and the Philippines (1.19%). India was the only market that
saw declines across maturities, while the see-saw continues for
South Korea 10+: the poorest segment for October, the best for
November, and then the worst again for December (-1.28%).
Through December, the overall index yield increased by 4 bps and
closed the year at 3.29%. Over the course of 2021, the overall
index yield gained 51 bps. The largest year-on-year uptick was
observed in the Philippines (+102 bps) while the biggest fall was
seen in China Onshore (-39 bps). Notably, only China Onshore and
China Offshore saw yield declines in 2021. India remains the
highest yielding bond market in the index offering 6.67%, while
Hong Kong ended the year (1.98%) as the lowest yielding market in
the index.
January 2022 Rebalance
The latest rebalance saw 16 bonds entering and 22 bonds leaving
the overall index. Please refer to the full report for a detailed
breakdown of insertions and deletions.
As announced in the
2021 Asian Annual Index Review results, an annual weight change
has been applied on the individual markets in the index on 30
November 2021. The latest weights are updated in the full
report.
The index duration lengthened by 0.08 to 6.86 years after the
recent rebalance. All markets except Singapore (-0.02 years) and
Indonesia (-0.01 years) saw their duration increase this month,
with the largest increase coming from Thailand (+0.20 years).
Effectively, South Korea currently has the longest duration (9.17
years) while China Offshore remains the least sensitive market to
interest rates with a duration of 2.95 years.
Posted 06 January 2022 by Kangwei Yang, Director - Indices, S&P Dow Jones Indices
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