This week, US asset manager PineBridge Investments released its 2025 Midyear Asia Fixed Income Outlook, highlighting a year of resilience, particularly for Asian high yield.

Despite US President Donald Trump’s announcement of sweeping tariffs, Omar Slim and Andy Suen, co-heads of Asia fixed income at PineBridge Investments, believe that most Asian credit markets will remain resilient, especially Asian high yield.

Slim and Suen said that export-driven nations such as Vietnam and Thailand and China face more significant risks, followed by South Korea, Malaysia, and Indonesia. In contrast, India, the Philippines, and Singapore along with Australia appear least affected, due to their more-diversified trade profiles.

Still, they believe that most major economies are well positioned to deploy fiscal and monetary measures to cushion the impact. Furthermore, few Asian credit issuers have significant exposure to the US. “Asian high yield (HY) issuers, being more domestically and regionally focused, are even more insulated than their investment grade (IG) counterparts,” Slim and Suen said.

The proof in the pudding lies in the returns Asian credit has generated in the first half of 2025. Asian credit markets posted a return of 3.82 per cent, as measured by the JP Morgan Asia Credit Index (JACI). More specifically, Asia IG returned 3.79 per cent, according to the JACI Investment Grade Index, while Asia HY delivered a return of 4.05 per cent, based on the JACI Non-Investment Grade Index.

“The resilience of the asset class extends to the region’s relatively stronger monetary and fiscal positions. Rather than fuel inflation, as they will likely do in the US, the tariffs should exert deflationary pressure in Asia,” Slim and Suen said.  

In contrast to the rising sovereign risk in developed markets, most Asian countries are managing their public finances prudently. Budget deficits remain contained, with the exception of China, where fiscal stimulus is ramping up. These dynamics, along with investors seeking to diversify away from the US, could bolster Asia credit. Investors who used to allocate more tactically to Asia fixed income may now view the asset class as a diversifier in their overall portfolios and – in their view – those who do not should consider doing so.

Asia investment grade
“Despite macro headwinds, Asia investment grade has demonstrated its stability, underpinned by steady fundamentals. Credit metrics remain robust across the region, with balance sheets well-positioned to absorb moderate shocks,” Slim and Suen said.

Over the past two years, the supply of Asia IG credit has evolved, making the asset class more diversified and enhancing its appeal. Japanese and Australian corporates have stepped up issuance, reflecting both investor appetite and issuer confidence, while Chinese supply has declined. While they anticipate some marginal widening in select segments – particularly if global risk sentiment deteriorates – they expect this to be contained.

Asia high yield
Slim and Suen believe that the outlook for Asia high yield remains broadly constructive, albeit with some nuances. Default rates have declined over the past two years and, excluding the distressed China property sector, they have stayed consistently low. This trend has continued year-to-date, so they expect it to hold through the rest of the year as China’s property sector keeps contracting and other segments remain broadly stable.

“From a yield perspective, Asia HY offers attractive carry with low duration, especially when compared with high yield bonds in developed markets,” they continued. While some names – particularly in commodity-linked sectors – may face pressure from a broader economic slowdown, they believe the impact will be manageable. At the same time, sectors tied to domestic demand could benefit if governments bump up stimulus to offset export weakness.

Spreads could be volatile amid ongoing trade policy uncertainty. However, Slim and Suen view any weakness in high-quality names as a potential buying opportunity. Importantly, major sectors such as Indian corporates and high-quality Chinese issuers enjoy solid access to local-currency markets. These companies also benefit from monetary easing, which helps mitigate refinancing risk.

All told, as the Asian credit market continues to grow and evolve, Slim and Suen believe its resilience remains a defining feature – and one that is attracting more global investor interest.

They are not alone in their views. Other investment managers such as Eastspring Investments are positive on Asia and think that investors should include Asia fixed income in a globally diversified portfolio. Pictet Asset Management also recently highlighted the need to diversify out of equities, notably US equities, and into bonds, including emerging markets. The firm believes that investors should increase their bond exposure, particularly credit and emerging market debt. See here and here.