PineBridge's Lau warns US interest rates and China's policy direction 'significant' credit risks in 2022

Default rate depends on Evergrande and Sri Lanka

PineBridge Investments’ Arthur Lau has said he expects the credit default rate in Asia to reduce in 2022 but warned that, more generally, the prospect of rising US interest rates and the heightened property sector risk within China could lead to higher volatility in Asia’s investment grade market.

Lau, who is co-head of emerging markets fixed income at PineBridge, is a portfolio manager on the $272.8m PineBridge Asia Pacific Investment Grade Bond and the $12.8m Asian High Yield Total Return Bond funds, both of which have been underweight China since the beginning of the year. He said the default rate in Asia is dependent on "timing", given that Chinese property developer Evergrande was declared in default on 9 December, following a missed coupon repayment of $82.5m. PineBridge's Lau also cited the situation in Sri Lanka where, "if they do not restructure their sovereign bond th...