Asian fixed income is in a sweet spot, underpinned by strong domestic fundamentals and attractive risk-adjusted yields. Asian markets are seeing growth return after firming commodity prices and stabilising politics. Due to the improving fiscal health and strengthening economies, many Emerging Asian countries are now better equipped to combat exogenous shocks. The asset class potentially provide an opportunity to diversify one's portfolio while meeting the objective of high yielding, lower-risk, regular cash flow.

Why Asian Local Currency Fixed Income now?

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Diverse currencies exposure may add to alpha in different time periods and market cycles. With China bonds inclusion into major bond indices, sizable trade and current account surpluses, the developed markets Asia local currency, anchored by Chinese Yuan, could resume their strengthening once there are signs of US Treasuries yields peaking.

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Source: Bloomberg and Commitments of Traders reports by US Commodity Futures Trading Commission (CFTC), as of 30 April 2018. CFTC US Dollar net long position contract numbers combined non-commercial accounts’ futures contracts 8 major currencies - Japanese Yen, Euro, Canadian Dollar, Australian Dollar, Swiss Franc, Mexican Peso, British Pound and New Zealand Dollar. The reports generally classify non-commercial accounts as asset managers, including hedge funds; commercial accounts as entities producing, processing, or merchandising commodity.

 

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Asia has come a long way since the Asian Financial Crisis of 20 years ago, as evidenced by the stronger GDP growth and lower government leverage

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Source: Bloomberg, Gross Domestic Production (GDP) year-on-year (%): Vietnam, China, Indonesia, Singapore, Taiwan, South Korea, United States, Italy, United Kingdom (UK) as of 31 March 2018; other countries are as of 31 December 2017. Debt to GDP as of 31 December 2017.

 

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Most of Asian countries’ sovereign credit rating are investment grade quality, with higher yields versus Developed Markets

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Source: Bloomberg, as of 25 May 2018. S&P Rating indicate long term Sovereign debt ratings in local currency for the respective countries.

 

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Asian bond returns comprise of local bond returns and currency returns where over time, having exposure to the asset class provides better risk reward returns than most emerging market debt indices.

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Source: Bloomberg, as of 31 May 2008 to 31 May 2018 in USD terms.
Emerging Markets Local Currency represented by J.P. Morgan GBI-EM Global Diversified Composite Unhedged USD; Emerging Markets Hard Currency represented by JP Morgan EMBI Plus Index; Global Bonds represented by FTSE World Government Bond Index; Global High Yield represented by Bloomberg Barclays Global High Yield TR Unhedged USD Index; US Bonds represented by Bloomberg Barclays US Aggregate TR Unhedged USD Index; US T-bills (1-3 months) represented by Bloomberg Barclays US T-bills (1-3 months) TR unhedged USD Index; US High Yield represented by Bloomberg Barclays US Corporate High Yield TR Unhedged USD Index.
* Asian Bond Local Currency represented by Markit iBoxx Asian Local Bond Index since 1 May 2016. On or before 29 April 2016, the index was HSBC Asian Local Bond Overall Index.


Legg Mason Western Asset Asian Opportunities Fund

Legg Mason Western Asset Asian Opportunities Fund seeks to maximise total return through income and capital appreciation by investing at least 70% in debt securities issued by Asian issuers and in derivatives on Asian interest rates and currencies. The Fund seeks to tap on the strong economic fundamentals of Asian economies and potential of currency appreciation to maximise total return.

Key Fund Features:

 

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Fund Performance



Source: Legg Mason. Performance is calculated on a NAV to NAV basis in USD terms, with income and dividends reinvested, if any, without initial charges unless otherwise stated, but reflecting annual management fees. Performance for periods above one year is annualised. Past performance is not indicative of future performance. Benchmark: Markit iBoxx Asian Local Bond Index since 1 May 2016. On or before 29 April 2016, the benchmark was HSBC Asian Local Bond Overall Index. Since inception: 2 July 2008.

Portfolio Managers


Desmond Soon
Head of Investment Management,
Asia (ex-Japan)/Portfolio Manager
Western Asset Management

  • 27 years of industry experience
  • Joined Western Asset in 2012

Chia Liang Lian
Head of Emerging
Markets Debt /
Portfolio Manager
Western Asset Management

  • 25 years of industry experience
  • Joined Western Asset in 2011

1Source: Morningstar. Morningstar Awards 2018© Morningstar, Inc. All Rights Reserved. Legg Mason Western Asset Asian Opportunities Fund Class A Acc. (USD) nominated for Category Winner, Asia Bond, Singapore."

2Source: BNY Mellon, latest annualised dividend rate (ex-date 17 September 2018) as at 21 September 2018. Annualised dividend rate = (Dividend per Unit / Fund NAV as of Ex-Date) x (365 Days/Days in distribution period) x 100%. Dividend rate is not indicative of fund performance. A positive dividend yield does not imply a positive return. Past dividend rate is not indicative of future dividend rate. Net asset value of the funds may volatile subject to market factors.

3Credit Quality: Nationally Recognised Statistical Rating Organisation's (NRSRO's) assess the likelihood of bond issuers defaulting on a bond's coupon and principal payments. The credit quality allocation by Western Asset Management assigns each security the higher rating from three NRSRO's (Standard & Poor's, Moody's Investor Services and Fitch Ratings, Ltd.). If only one NRSRO assigns a rating, that rating will be used. Securities that are not rated by all three NRSRO's are reflected as such. The lower the overall credit rating, the riskier the portfolio. The credit rating is expressed as a regular letter rating (from high to low quality): AAA, AA, A, BBB, BB, ...D.

Source: Legg Mason and Western Asset Management as of 31 August 2018. This document, provided by Legg Mason Asset Management Singapore Pte. Limited ("Legg Mason") (Registration Number (UEN): 200007942R), is for information only and does not constitute an offer or solicitation to buy or sell any units in any fund.
The Fund may invest in certain types of derivatives for investment and / or efficient portfolio management purposes. Please refer to the prospectus for more information. Due to the investment policies of the Fund, this Fund may have particularly volatile performance. Distributing Plus share classes may pay dividend out of capital. The payment of dividends out of capital effectively amounts to a return or withdrawal of an investor's original capital investment or of capital gains attributable to that original investment. Such distribution will result in a corresponding immediate decrease in the Net Asset Value of these share classes.

The fund is a sub-fund of Legg Mason Global Funds plc, an open-ended umbrella investment company constituted in Ireland. The prospectus of the funds is available and may be obtained from Legg Mason or its authorised distributors. Investors should read the prospectus prior to any subscription.  All applications for units in the funds must be made on the application forms accompanying the prospectus.  Past performance is not necessarily indicative of future performance. All investments involve risk, including possible loss of principal. The value of the units in the fund and the income accruing to the units, if any, may fall or rise.
Distribution of this document may be restricted in certain jurisdictions. Any persons coming into possession of this document should seek advice for details of, and observe such restrictions (if any). This document does not constitute the distribution of any information or the making of any offer or solicitation by anyone in any jurisdiction in which such distribution or offer is not authorized or to any person to whom it is unlawful to distribute such a document or make such an offer or solicitation.  This fund is not available to US citizens, residents or greencard holders and may not be available in all jurisdictions.
Neither Legg Mason nor any officer or employee of Legg Mason accepts any liability whatsoever for any loss arising from any use of this document or its contents. The information in this document is proprietary and may not be used other than by the intended user. This document may not be reproduced, distributed or published without prior written permission from Legg Mason.

The mention of any individual securities / funds should neither constitute nor be construed as a recommendation to purchase or sell securities, and the information provided regarding such individual securities / funds is not a sufficient basis upon which to make an investment decision. Portfolio allocations, holdings and characteristics are subject to change at any time. Although information has been obtained from sources that Legg Mason believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. Legg Mason, its affiliates, officers or directors, may have an interest in the acquisition or disposal of the securities mentioned herein.

The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, a guarantee of future results or investment advice.

 
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