Asia's fixed-income markets could see increased inflows in the next 12 months from global institutional investors seeking higher yield, said the results of a study released Tuesday by investment consulting firm Greenwich Associates.
The study found that more than half of the institutional investors and private banks participating in the study have an allocation to Asian fixed income. Of those investors surveyed, 41% plan to increase their allocations in the next 12 months, while 54% plan to maintain their allocations.
Of those that don't have holdings in Asian fixed-income strategies, 25% plan to initiate investment in the next 12 months.
This increased appetite for such assets are driven by the Asia fixed-income market representing a rare source of yield, and also by the Asian markets becoming more liquid.
The top reasons that survey participants gave for planning to increase their exposures to Asia-based fixed income are: higher yields compared to other fixed-income assets (72%), favorable macro view on the asset class (46%) and inclusion of Asian fixed income in global indexes (41%).
The growing appetite for Chinese assets is also driving this increased demand for Asia-focused fixed income. Two-thirds of study respondents chose China as the most attractive source of investment from a list of major government bond markets in Asia ex-Japan.
The study noted that 364 onshore Chinese bonds will be added to the Bloomberg Barclays Global Aggregate Bond Index over the course of this year and next.
"That move marks a key moment in the integration of China's $13 trillion bond market into the global fixed-income market — and into the portfolios of investors around the world," said Parijat Banerjee, Greenwich Associates Principal and co-author of the study, in a news release.
Greenwich Associates surveyed 187 institutional investors and private banks from October to March for the study, "Asian Fixed Income on the Rise" (registration required). The research sample consisted of 151 institutional investors and 36 intermediary fund distributors from the Asia-Pacific, Europe and the U.S.