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iBoxx USD Asia ex-Japan Monthly Update: March 2022

04 March 2022 Wilson Mak

February 2022 End-of-Month Commentary

Market volatility surged in February as geopolitical tension in Eastern Europe escalated into a war. Russia launched an invasion of Ukraine, and Western countries responded with economic sanctions. This conflict came when markets were already grappling with ongoing inflationary pressures and tightening monetary policy expectations. As uncertainty remained high, investment sentiment turned more risk averse, driving a flight to safe-haven assets.

Asian USD bonds were not immune to the impact of the conflict. The iBoxx USD Asia ex-Japan index sank -1.97% in February as investors retreated from risky assets. The index yield and credit spread widened by 0.38 percentage points (ppts) and 25 basis points (bps), respectively. Negative performance was seen in most maturity and rating sub-indices.

This month, the Asia USD IG and HY sub-indices both continued to record losses. The Asia USD IG index fell -1.45% with its credit spread advanced by 20 bps, while the Asia USD HY index tumbled - 4.21% with its credit spread widening by 115 bps.

The seven largest markets in the index returned negative, with the Philippines (- 3.19%), mainland China (-2.22) and Indonesia (-2.06%) logging the largest declines.

In the corporate space, Consumer Services, Financials and Technology were the worst performers, while Health Care was the only sector that recorded a gain.

Sentiment towards China USD bonds (-2.19%) continued to remain bearish, most noticeably in the real estate sector. Issuer Yango Group from the sector missed deadlines for making coupon payments and was removed from the index.

On the other hand, the China USD LGFV index (+0.11%) remained a bright spot - both its subindex investment grade (-0.13%) and high yield (+0.86%) outperformed other sub-indices in the China USD index family.

March 2022 Rebalance

This rebalance, the iBoxx USD Asia ex-Japan index added 20 eligible bonds, bringing in close to USD 9.8 billion of new notional.

The investment grade (IG) sub-index saw 16 new issues amounting to USD 7.9 billion, while the high yield (HY) sub-index saw about USD 1.9 billion worth of notional raised from 4 issues.

Of the 23 bonds removed from the index this month:

  • 5 were traded flat of accrued interest - all guaranteed by Yango Group (a Chinese real estate developer)
  • 1 was partially exchanged and became ineligible for the index

Please refer to the full commentary for a breakdown of this month's insertions and deletions, and a list of fallen angels and rising stars recognised in 2021.

Post rebalance, the overall index duration was up slightly at 4.50 years. Markets with large bond turnovers included mainland China, Hong Kong and South Korea.

In mainland China, Bank of China added four new bonds to the index with an aggregated notional of USD 1.6 billion, replacing a matured USD 500 million bond of theirs.

In the Hong Kong real estate market, a short-dated BB bond from Wanda Group entered the index, while an A-rated bond from Sun Hung Kai Properties matured in February and dropped out of the index.

In South Korea, the index consumed new bonds across Core Financials and Consumer Goods sectors. In addition, Korea Development Bank added two new bonds with a combined notional amount of USD 1.5 billion.


Posted 04 March 2022 by Wilson Mak, Analyst - Indices, IHS Markit



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