February 2025
JKC Asia Bond 2025 – Fixed Maturity Fund February 2025 Update
- Asian IG markets whipsawed but ended the month higher after UST bond yields declined at month end
- Fears of immediate tariffs by the incoming Trump administration were eased as the new US government appeared to (initially) take a more pragmatic approach to trade policy
- Global equity markets remained volatile as China AI startup DeepSeek threw global tech rally into question…
- …although impact on Asian credit spreads was generally muted
- Asian HY markets continued to be predominantly driven by property issuers with NWD (falling) and Vanke (gaining) the biggest market movers
- Defensive positioning of the JKC Asia Bond 2025 portfolio allowed the fund to outperform the Asian HY Index for a fourth consecutive month
The Asian dollar bond market had a mixed performance in January 2025 with long duration Investment Grade (IG) bonds outperforming, helped by a month-end drop in US Treasury yields. However single name idiosyncratic risk in the property sector weighed heavily on the High Yield (HY) space extending the weakness seen in Asian HY indices since last September. Consequently, the Markit benchmark ADBI (predominantly IG names) and AHBI (HY names) indices ended the month with returns of +0.62% and +0.16% respectively. Meanwhile although the JKC Asia Bond 2025 portfolio was not able to meaningfully benefit from the UST driven gains on account of the fund’s short duration positioning, the fund still returned a decent +0.42% on account of low exposure to underperforming Hong Kong property names. The fund has now outperformed the Asian HY market in each of the past four months.
The year started softly as US bond yields extended their December surge on the back of diminishing hopes of US rate cuts in 2025 and 2026 following the Federal Reserve meeting held in December that hinted the US central bank was still highly concerned about sticky inflation. A stronger than expected Non-Farm Payroll jobs report for December announced in early January reinforced this narrative with 10-year US Treasuries yields hitting a 12-month high of 4.79% on January 14th. However, although much of the recent moves in yields had clearly been driven by concerns over the incoming Trump administration’s inflationary policy agenda, it was actually Trump himself signaling a more gradual than feared approach to import tariffs that actually helped stabilize the US Treasury market. Indeed, while Trump’s highly anticipated first day in office did see a record number of executive orders signed, the absence of immediate tariff announcements helped further calm rates markets. The 10-year Treasuries yield ended the month at 4.53%. Of course, the tariff situation will inevitably evolve rapidly in the months ahead although we believe the low beta nature of the portfolio will shield the fund from significant interest rates uncertainty this year.
US equity markets saw plenty of volatility in January as the massive AI driven rally of large cap technology stocks was called into doubt following the surprise news that a previously little known Chinese tech start-up DeepSeek had created an open source Large Language Model (LLM) chatbot app with performances similar to established US rivals such as ChatGPT using legacy technologies at a fraction of the cost. Although this also caused some sharp moves in technology-heavy Asian markets such as Taiwan and Korea, the overall impact on Asian credit markets, even for the technology names directly impacted, was relatively muted. As a result, Asian IG credit indices were little changed over the month of January.
In contrast High Yield bonds continued to see a small number of high beta property issuers driving the market. The most significant mover for a second consecutive month was Hong Kong conglomerate New World Development (NWD) which saw a further collapse in its bond prices after the company sought to negotiate repayment terms with some of its banks. In the middle of January, the company announced it would pledge USD15bn of collateral to banks. Although this will ease covenant stress, it does raise concerns about weaker asset coverage for bond investors. NWD bonds did stabilize at month-end after it was reported that the company had been approached regarding possible asset sales. The bonds still lost between 15 and 20 points over the month. Other Hong Kong property issuers such as CSI Properties and Lai Sun Development also saw their bonds fall in sympathy.
In contrast, another name which had been the focus of recent market volatility, property giant China Vanke, saw its bonds sharply rebound in January following news that the company’s CEO and Chairman were being ousted and replaced by representatives from its state-owned shareholder Shenzhen Metro. Much of the market saw this as a signal of an effective nationalisation of the company by the Shenzhen Government, and bonds rallied in anticipation of future State support. Although there has been no specific confirmation that the local authorities will bail out Vanke USD bondholders, the next maturing issue (in May 2025) saw its price jump from less than 60% of nominal value on January 16th to a 2-year high of 92% by month-end.
If the Chinese government was to bail out Vanke, it would be the first example of a large scale bail out since the start of the property crisis in 2021. It is interesting to note however that one company that had been thought to achieve a successful restructuring previously, namely Sunac China, announced this month that it would not be honouring the terms of that restructuring and was seeking another round of renegotiation with bondholders. This clearly demonstrates in our view that despite the apparent positive development about Vanke, the China property crisis is far from over and continues to justify our significant underweight to this sector with less than 1.5% total exposure in the portfolio.
MONTHLY PERFORMANCE

The information and material provided herein do not in any case represent advice, offer, sollicitation or recommendation to invest in specific investments. The information contained herein is issued by JK Capital Management Limited. To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. Under no circumstances should this information or any part of it be copied, reproduced or redistributed.