PETALING JAYA — The main factor impacting the global growth for bond markets is the level of legal and regulatory uncertainty from the Brexit decision, said Eastspring Investments Bhd chief investment officer (Fixed Income) Ooi Boon Peng.
“This uncertainty about how policy would be shaped from now on will lead to companies being more conservative on how they spend on capital expenditure and investments,” he told reporters after launching Eastspring’s new Global Target Income Fund yesterday.
Besides Brexit, Ooi said the global bond market outlook this year will remain challenging due to high debt levels in emerging market economies and persistent disinflationary pressures.
“However, we do not see a heightened risk of a global recession, as United States (US) and Eurozone growth remain steady. Similarly, we expect steady Asian growth with China keeping to a 6%-7% growth path.”
Against this backdrop, Eastspring sees interest rates remaining stable. “Any interest rate increase would be moderated by US Federal Reserve (Fed) tightening. The Fed would keep to a gradual tightening path, while the European Central Bank and Bank of Japan will keep monetary policy easy.”
“Central bank policy would remain accommodative and hence supportive of bonds,” he said.
The Eastspring Investments Global Target Income Fund aims to provide regular income and capital sustainability over time, and foreign currency exposure may be hedged back to ringgit.
It adopts a maturity bucketing approach, such as maintaining a portfolio of fixed income securities with staggered maturities.