‘The underweight in Asia has been the same for some time now as I don’t think there is much value in any bonds there. I previously had some positions in the high-yielding part of Asia, I liked Sri Lanka and Mongolia.
'Then Mongolia performed well, they got some help from the IMF and the moment that happened everyone seemed to rush for these bonds, and at that moment I sold most of my exposure.
‘There are some high-yielding bonds in Asia, but they are quite expensive right now, so it makes sense to sell them,’ he says.
Apart from his previous positions in Mongolia, D’hooge says he didn’t have much exposure to other Asian regions such as China and the Philippines.
‘The Philippines is too expensive. The economy is doing well but I’m not sure that is going to continue under President Duterte.’
Duterte has been involved in a number of scandals, including allegations that his son had been involved in a drug smuggling operation.
‘The President could have a bad long-term effect, but those bonds are very tight. They trade so tightly over the treasuries that it makes no sense to invest in them.
'They are in the benchmark but that doesn’t mean I am going to buy them. There are some bonds that are expensive just because they are in the benchmark or because locals have been buying them up,’ he says.
Tension in North Korea
One challenge D’hooge says could arise in the region is the noise surrounding North Korea and how this could impact other Asian nations.
‘Is it a challenge or a fear? North Korea is a problem. There is a lot more protectionism coming into the world, which is not good. But it’s developing slowly and not at a dramatic pace.
‘What would hurt a lot is if we were to see a removal of liquidity across the market in a very quick and abrupt way, which I do not expect. It’s more likely that liquidity will dry up very slowly, which the market could cope with,’ he says.
These comments originally appeared as part of an article in the October edition of the Citywire Selector magazine.