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Buffeted by surging inflation, swayed by China’s zero-Covid policy, waves of central bank rate hikes, and the ebb and flow of geopolitics, Asia’s bond markets felt the full brunt of the stormy days of 2022. Yet, in a true test of resiliency, local currency bond markets have held up despite massive selling by foreign investors during the period. What’s happened in 2022 is yet another testament to the painstaking efforts in laying the foundation for the region’s bond markets firmly establishing Asian bonds as an asset class. For Asia’s fixed-income markets, environmental, social and governance (ESG) issues continue to be prominent themes, boosting demand for green, social and sustainability (GSS) bonds and the development of sustainability-linked bonds (SLBs), which are likely to follow their GSS counterparts into the mainstream. And, consequently, as investors favour issuers with stronger ESG credentials, borrowers with low scores will likely find it challenging to access the fixed-income market.
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