Bloomberg News

Asian Bonds to Rally on Slowing Inflation, Western Asset Says

February 15, 2012

Feb. 15 (Bloomberg) -- Moderating inflationary pressures and growth-focused policies in Asia will support the region’s government bonds, according to Western Asset Management Co.

“The rate-hike cycle appears to have come to an end for most Asian countries, and a shift to accommodative monetary policies in the near term will provide upside potential to government bonds,” Chia-Liang Lian, the Singapore-based head of investment management for Asia excluding Japan at Western Asset, said in a press release sent to Bloomberg today. Western Asset, which manages $443 billion of assets globally, is part of Baltimore-based Legg Mason Inc.

Asian policy makers are in a “very favorable position” to employ expansionary measures as their governments have strong balance sheets, while slower global growth will lead to reduced inflationary pressure, Lian said.

India’s inflation rate, the highest in Asia’s 10 largest economies, dropped to a two-year low of 6.55 percent in January, official data show. Consumer prices in South Korea and the Philippines increased at the slowest pace in a year, while Indonesia’s recorded the smallest gain since March 2010.

China’s inflation rate could slip below 4 percent for the first time in 17 months in February and the full-year rate will see a “clear deceleration” from 2011, Zhou Wangjun, vice director of the pricing department at the National Development and Reform Commission, said in a Feb. 13 webcast with the official Xinhua News Agency.

Among Asian currencies, Western Asset favors South Korea’s won, the Singapore dollar, Malaysia’s ringgit, Indonesia’s rupiah, China’s yuan and the Philippine peso, Lian said.

Lian, who previously worked as an economist at the Monetary Authority of Singapore, joined Western Asset last year from Pacific Investment Management Co.

--Editors: James Regan, Ven Ram

To contact the reporter on this story: Fion Li in Hong Kong at fli59@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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