Tags: Pimco | Asian | Bonds | Gross

Pimco: Buy Asian Bonds Instead of U.S., Europe

Tuesday, 30 Mar 2010 09:42 AM

By Dan Weil

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Bond fund titan Pimco recommends that investors buy Asian-Pacific bonds over those of Europe and the United States, thanks to a superior economic policy in the Far East.

Political developments, the withdrawal of stimulus and increased regulations could put U.S. and European bonds at a disadvantage, Brian Barker, CEO of Pimco’s Asian division, told Bloomberg.

“Politics are going to play a very important role in how an investor looks at asset classes over at least the next 12 months,” he said.

“As policymakers withdraw from their fiscal stimulus, and as regulations are put in place in the financial system in the developed world, we run the risk of a policy mistake” that will hurt markets.

Meanwhile, Asia benefits from strong, sustained economic growth, Barker says. Of course, investors should focus on bonds of companies with strong cash flow in countries with a solid economic policy.

He likes bonds in Australia, Indonesia, the Philippines and South Korea.

“In many cases, an emerging market sovereign has a better balance sheet than a developed market sovereign that has a higher credit rating, given the fiscal spending that’s gone on in the developed markets,” Baker said.

When it comes to emerging market bonds, some experts are counseling caution.

“There are a lot of fundamental reasons why you wouldn’t want to increase your allocation now. Global central banks will be increasing rates eventually,” Brad Durham, managing director of research firm EPFR Global, told the Financial Times.

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