Stewart Investors manage investment portfolios on behalf of our clients over the long term and have held shares in some companies for over 20 years. They launched their first investment strategy in 1988.
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Please read the following important information for First Sentier Asian Quality Bond Fund
• The Fund invests primarily in debt securities of governments or quasi-government organization in Asia and/or issuers organised, headquartered or having their primary business operations in Asia.
• The Fund’s investments may be concentrated in a single, small number of countries or specific region which may have higher volatility or greater loss of capital than more diversified portfolios.
• The Fund invests in emerging markets which may have increased risks than developed markets including liquidity risk, currency risk/control, political and economic uncertainties, high degree of volatility, settlement risk and custody risk.
• The Fund invests in sovereign debt securities which are exposed to political, social and economic risks. The Fund may also expose to RMB currency and conversion risk.
• The Fund invests in debts or fixed income securities which may be subject to credit, interest rate, currency and credit rating reliability risks which would negatively affect its value. Investment grade securities may be subject to risk of being downgraded and the value of the Fund may be adversely affected. The Fund may invest in below investment grade, unrated debt securities which exposes to greater volatility risk, default risk and price changes due to change in the issuer's creditworthiness.
• The Fund may use FDIs for efficient portfolio management purposes, which may subject the Fund to additional liquidity, valuation, counterparty and over the counter transaction risks.
• For certain share classes, the Fund may at its discretion pay dividend out of capital or pay fees and expenses out of capital to increase distributable income and effectively a distribution out of capital. This amounts to a return or withdrawal of your original investment or from any capital gains attributable to that, and may result in an immediate decrease of NAV per share.
• It is possible that a part or entire value of your investment could be lost. You should not base your investment decision solely on this document. Please read the offering document including risk factors for details.
A monthly review and outlook of the Asian Quality Bond market.
Market review - as at April 2025
April was marked by tariff-driven volatility. The 10-year US benchmark interest rate experienced a modest decline of 4 basis points (bps), settling at 4.16%. However, this small net change masks the dramatic fluctuations throughout the month. Early April saw UST 10-year yields dip below 4%, only to surge to 4.48% within a week, driven by market reactions to President Trump’s unexpectedly stringent “Liberation Day” tariffs.
The 2s-10s of the US Treasury curve steepened by 24 basis points. Investors reacting to the heightened risk environment shifted their focus from long-dated bonds to shorter-term maturities. This shift was evident in the 2-year US interest rate, which fell by 28 basis points to end the month at 3.73%.
Compared to other investment-grade bond sectors, Investment Grade (IG) USD Asian bonds’ spreads saw lesser volatility, with spreads ending at 133bps, 11bps wider than the previous month. Relatively high carry still helped Asian IG credits return a +0.25% in positive returns over the month.
China’s significant tariff shocks, far in excess of those in 2018-19, as well as the sovereign’s tit-for-tat retaliation measures, tanked growth expectations globally. An exodus of selling caused spreads to decompress across the board, before market stability gradually returned on Trump’s partial relaxation of tariffs a week later. In Indian Corporates, the Adani curve fell up to 2 points lower over the course of the month. Parallel to news of tariffs, Fitch downgraded China’s sovereign rating to A from A+ on concerns over weakening finances and rising public debt. Alibaba bonds were likewise downgraded to A by Fitch to reflect China’s sovereign rating, but Meituan was upgraded to BBB+ from BBB on improving fundamentals. Moody’s revised its sovereign outlook on Thailand’s Baa1 rating to negative, due to the anticipated tariff impact on Thailand’s economy. Thailand financials saw spreads widen on downside risks to credit ratings. In HK Industrials, CK Hutchison announced that it would not proceed with divesting its two Panama ports, after concerns from China due to geopolitical issues.
In Asian IG sovereigns, Indonesia’s newly established Sovereign Wealth Fund (SWF) - Danantara, continued to see spreads weighed down by the SWF’s management oversight and Indonesia’s fiscal discipline concerns.
Given heightened risk-off sentiments, issuance activity in the Asian USD primary market decreased from March’s levels. Notable issuers included POSCO’s and Kookmin Bank’s respective USD700bn issuances. Year to date, issuances from China, Korea, and Hong Kong have been the largest contributors to new bond supply.
Fund positioning
The Fund maintained an overweight in US rates in anticipation of a weakening macro backdrop, while adjusting credit positioning towards more defensive names. Reallocations and profit-taking were made in the local currency space on the back of the strong rally in Asian local currencies.
Performance review
On a net-of-fees basis, the First Sentier Asian Quality Bond Fund returned 0.30% in April, outperforming its benchmark by 0.04%.
An underweight positioning in credit spreads detracted from performance, while the portfolio’s overweight in US rates contributed to returns. Local rates and currency exposure was positive for returns.
Source : Company data, First Sentier Investors, as of end of April 2025
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Important Information
Investment involves risks, past performance is not a guide to future performance. Refer to the offering documents of the respective funds for details, including risk factors. The information contained within this material has been obtained from sources that First Sentier Investors (“FSI”) believes to be reliable and accurate at the time of issue but no representation or warranty, expressed or implied, is made as to the fairness, accuracy or completeness of the information. To the extent permitted by law, neither FSI, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from any use of this. It does not constitute investment advice and should not be used as the basis of any investment decision, nor should it be treated as a recommendation for any investment. The information in this material may not be edited and/or reproduced in whole or in part without the prior consent of FSI.
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Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of FSI’s portfolios at a certain point in time, and the holdings may change over time.
First Sentier Investors (Hong Kong) Limited is part of the investment management business of First Sentier Investors, which is ultimately owned by Mitsubishi UFJ Financial Group, Inc. (“MUFG”), a global financial group. First Sentier Investors includes a number of entities in different jurisdictions.
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