Thumbs up to investment-grade bonds

John Woods, managing director of Credit Suisse and chief investment officer for Asia Pacific, yesterday said he believed central banks in developed countries, especially in the United States, would continue to raise interest rates as they normalise their policies after many years of ultra-low interest rates and massive injection of liquidity into the markets. 
He expected the global economic recovery to be sustained and would remain relatively robust in the second half of this year.
This is a good opportunity to consider appropriate income strategies, including floating rate notes, investment-grade bonds of short duration and other income-oriented investment offering resilient or rising income streams in such an environment, he said. 
Credit Suisse also recommended investors to put their money in Asian US dollar corporate investment-grade bonds, saying they continue to record positive returns.
Credit Suisse has a neutral view on global equities, saying that stocks had had a good start to the year on the back of strong economic momentum and high expectations of large investment in infrastructure and spending by the Donald Trump administration. 

Policy-tightening 
Given the possibility of the US Federal Reserve tightening policy further, equities are likely to move sideways from here. Woods expected the Fed to raise the interest rate twice in the next 12 months, the first coming in December.
Regarding Thailand’s equity market, Woods said that Thai equities have underperformed emerging markets and Asian equities by 15 to 20 per cent, year-to-date, and the valuation remains unattractive. 
The market is still trading at a price-to-earnings ratio of 14.5 times, on the expensive side relative to its 10-year historical average.
Moreover, earnings growth is rolling over with disappointing second-quarter results from banking and consumer sectors and 2017 earnings-growth expectation of 7.5 per cent remains well below the strong 20 per cent growth expected in Asian equities which could dissuade investors from increasing exposure in Thailand. 
Woods did not expect any meaningful recovery in Thai equities. Given that Thailand is a defensive market and has attracted limited interest from foreign investors in 2017, moderation in investor interest towards North Asian markets could provide support on the downside, he said.
Regarding the movement of the baht, Credit Suisse said the Thai currency had hit its strongest point since May 2015, as foreign investors were pouring money into the bonds market and Thailand has large current account surplus.