- Fixed Income Portfolio Manager
Netherlands, Intermediary
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In this edition of “Rapid Fire Questions,” fixed income portfolio manager Ross Dilkes shares his views on the Asia credit market—covering the macro outlook, China’s momentum, the most compelling opportunities across the region, and key risks shaping the next 12 months.
Question: What is your biggest takeaway from the recent FOMC meetings, and what does it mean for Asia?
I think it's pretty clear that the FOMC is worried about the outlook for employment in the US, and likely rates will be coming down over the next couple of quarters. That does provide a good backdrop for Asia. It reduces some of the potential risks around currency depreciation, and it probably allows more policy flex.
So, we'll see accommodative monetary policy in Asia, in line with how we're seeing rate cuts coming through in developed markets too. So, overall the region will get a benefit from easier financial conditions, easier monetary policy, and ultimately that's going to be a pretty constructive backdrop for credit within the region.
Question: Can the rally in China risk assets continue?
We've seen very strong performance recently from assets in China. I think growing optimism on the economic outlook has been a big driver for that, both in terms of confidence in policy, but also from a bottom-up perspective. We've seen a lot of companies benefiting from shifts towards growth in AI spend, or certainly in other industries that are going to benefit from a lot of the global drivers that are driving markets currently.
So, I think China is increasingly well positioned to benefit. Investors are starting to re-engage with that story. The lower growth environment that we've had over the last few years has been headwind and potentially has been creating concerns for people investing in China, but we see this is the early stages of confidence coming back to that market, and therefore there's a lot of runways for future outperformance from here. And we're increasingly confident in the outlook for China assets.
Question: What are your highest conviction ideas at the moment?
In terms of where we're looking to place our highest conviction views, we're always looking for areas where the market hasn't fully reflected a big opportunity for credit improvement within the regions.
Sovereign opportunities in Sri Lanka are a significant conviction for us, in terms of a credit that has been through a more difficult time and is actually on a strong, improving trend. Similarly, when we think about private sector opportunities—markets like Hong Kong and China real estate, where they've obviously had a more challenging cycle—we see signs of an inflection, and so we're looking for opportunities in those spaces, particularly in Hong Kong. So, those are the examples where we see markets that haven't fully priced that improvement yet.
Question: What are the key risks to look out for in the next 6 to 12 months?
I think the key risks probably sit outside of the region mostly rather than within. So, we think about risk to global growth, that's obviously a big consideration currently. Equally, inflation pressure is still there in the global economy. So, we see those pressures start to build. They will have an impact.
I do think that Asia is actually very well positioned to deal with those forces ultimately, and I think it would be an outperformer in the context of a region that doesn't have a huge amount of inflation pressure currently within the region itself. So, those are going to be issues for fixed income markets. We need to obviously reflect on those potential outcomes and what that might mean for the region.
But ultimately, we think we're quite well placed to deal with those factors even if they do emerge in 2026. So, I'm confident on the outlook for Asia as a whole, but cognizant that we do have some unanswered questions around growth and inflation. They will have impact to fixed income markets more broadly.
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