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Gains were seen across major stock markets globally, spurred by
strong results in the latest corporate earnings season. Several
major US banks contributed to the cause as their latest report
cards surpassed market expectations. However, US GDP slowed sharply
from 6.7% in Q2 to 2% in Q3, well below market consensus, sending
mixed signals to investors.
In Asia, the Chinese property market continued to be distressed
as more real estate developers fell into liquidity woes after
Evergrande had begun to trade flat in late September.
The iBoxx Asian Local Bond Index (unhedged in USD) - mostly
Asian local currency government bonds exposure (79.6%) - gained
0.21% in October despite most local markets ending the month in the
red. This was due to the weakening of the US dollar against all but
one (Indian Rupee) of the currencies represented in the index,
which made up ground for capital losses in the overall index
return. Indonesia was the only market (in local currency terms)
that had a positive month, returning 0.78% month-on-month. South
Korea and Singapore led the losses with returns of -2.63% and
-1.57%, respectively.
Most markets were in negative territory across the yield curve
and the largest losses were concentrated in the 10+ segment. South
Korea 10+ (which was the worst performer last month) carried its
poor performance into October as it returned -4.65%. Indonesia was
the only market that saw a sea of green across the yield curve.
The overall index yield rose 16 bps and closed the month at
3.38%. All markets except Indonesia (-4 bps) contributed to the
increase in yield. The largest yield upticks came from South Korea
(+32 bps) and Singapore (+25 bps). India continues to be the
highest yielding bond market in the index offering 6.63%, while
Hong Kong, at 1.99%, remains the lowest yielding market in the
index.
November 2021 Rebalance
The latest rebalance saw 25 bonds entering and 24 bonds leaving
the overall index. Please refer to the Appendix for a detailed
breakdown of insertions and deletions.
As announced in the
2021 Asian Annual Index Review results, an annual weight change
will be applied to the individual markets in the index on 30
November 2021.
The index duration lengthened by 0.08 to 6.83 years after the
recent rebalance. All markets except Thailand (-0.04 years) saw
their duration increase this month, with the largest increase
coming from South Korea (+0.19 years). Currently, South Korea has
the longest duration (8.97 years ) while China Offshore remains the
least sensitive market to interest rates with a duration of 2.99
years.
Posted 05 November 2021 by Kangwei Yang, Director - Indices, IHS Markit
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