Pimco likes China and Indonesia bonds, turns away from India

Pacific Investment Management Co is turning away from Indian bonds in favour of Chinese and Indonesian debt, saying their valuations have become more attractive and slower growth will spur policy easing.
Securities denominated in the yuan and rupiah have also become more enticing due to contained domestic inflation, according to Roland Mieth, emerging-markets portfolio manager in Singapore at Pimco, which oversees about $1.8tn globally.
“We see Indian bonds as more neutral compared to other duration markets in Asia, including countries like China and Indonesia where we expect rates to provide a positive return proposition,” Mieth said. “Rates easing, inflation remaining stable and growth either slowing down or remaining stable” enhance the appeal of yuan and rupiah bonds, he said.
Speculation the Federal Reserve will ease policy is shaping the narrative for bond investors across Asia, as funds calculate a US interest-rate cut will pave the way for other central banks to follow suit.
Aviva Investors and Principal Global Investors are also favouring Chinese bonds on speculation the central bank will adopt an accommodative stance. The yield on the nation’s 10-year debt has fallen almost 20 basis points from this year’s high to 3.25%.
Indonesian bonds may lure greater inflows after the central bank indicated last month it may be open to an easing if conditions warrant.
Rupiah sovereign debt has returned almost 5% this year, according to Bloomberg Barclays indexes.
The Reserve Bank of India may lower interest rates again, but Pimco would like to see more details on the new government’s fiscal policies before boosting its holdings of rupee debt, according to Mieth.