JKC Asia Bond 2025 – Fixed Maturity Fund November 2025 Update

• Another volatile but ultimately positive month for global and Asian markets in October
• US tech remains the key driver for the global risk-on trade driving outperformance for North Asian markets
• Market wobbled in mid-October as US and China ratcheted up trade tensions…
• …although the rhetoric was diffused after Presidents Xi and Trump agreed to meet for trade talks in Korea at month end
• Asian bonds also saw some impact from news of stresses rising in US private credit market following two high profile defaults in September
• Gold hit record intra-month high in October although thawing US-China relations drove some profit taking at month end
• US government shutdown, lasting the whole of October, resulted in delays in US economic data releases which could potentially affect US rate cut timeline going forward
• Although US Treasuries sold off at month end as expectations of a December rate cut diminished, Asian dollar bonds continued to see further gains for the month (ADBI +0.77%, AHBI +0.80%)
• JKC Asia Bond 2025 saw a 0.27% gain for the month once again reflecting the average yield of the short dated positions in the fund.

Another volatile but ultimately positive month for global risk assets as an extension of the tech driven rally in US stocks helped drive Asian markets higher, particularly segments highly exposed to the AI theme. North Asian bourses including Japan, Korea and Taiwan naturally outperformed as their equity indices gained 10-20%, driven by technology heavy weights. Chinese shares were more mixed as advances in A-shares were offset by some profit taking in the previously high-flying Hong Kong market, while South Asian markets, particularly ASEAN economies, were also laggards in the region. Asian dollar bonds continued their positive trend although the pace of gains appeared to show some signs of fatigue as global credit spreads were already trading at expensive valuations at the start of the month and jitters in the US private credit market in early October weighed on the sector. Nevertheless, the Investment Grade (IG) heavy ADBI Index ended the month up 0.77% while the High Yield (HY) equivalent AHBI closed out October up 0.80%.

After the highly expected Fed rate cut in September the bond market started the month in buoyant mood, expecting further cuts in October and December to extend the rally in USD bonds. However, a renewal of the trade spat between US and China combined with the news of high-profile failures in the US private credit market raised some concerns for the wider market. Although the default of US auto parts supplier First Brands and US car dealership Tricolor had already been reported in September, the extent of large scale bank exposure to these names became apparent in October rising fears of widespread credit exposure across the whole banking system. Further driving the markets defensiveness was a sudden escalation of trade tensions between China and US as President Trump reacted to reports of China imposing a new licensing system of critical rare earth exports with threats of a massive hike in Chinese import tariffs. This aggressive rhetoric however was toned down as Presidents Trump and Xi agreed to meet for trade talks in Korea at month end and both equities and bonds resumed their rally on anticipation of a potential trade deal.

Gold prices which had rallied sharply to a record high USD4,380/oz (up +13% intra-month) in mid-October also saw profit taking on the back of the de-escalation of US-China tension ending the month up just 3.7%. Notwithstanding the credit and trade issues, another factor driving gold’s rally has no doubt been concerns on the US fiscal situation as an impasse in Congress saw the US government in effective lockdown for the whole month of October. One casualty of the government shutdown has been a halt on the release of key economic data including the widely followed monthly Bureau of Labor Statistics employment report. In fact, this lack of economic transparency was specifically highlighted by Federal Reserve chairman Powell who after cutting interest rates at the October meeting cast uncertainty on further cuts until the economic situation becomes less opaque. However, with Democrat and Republican leaders in the US Congress showing little signs of compromise the timing of the approval for raising the US debt ceiling remains unclear. This could further weigh on Asian USD bonds if interest rate cuts are pushed back beyond market expectations, particularly if this also triggers corresponding gains in the USD against Asian currencies. 

Within Asia, market gains in October were broad-based on a sector and country basis. Underperformers earlier in the year including Hong Kong conglomerate New World Development and Philippines property company Vista Land rebounded and led the gains for the ADBI index. Meanwhile recovering sovereign Sri Lanka also saw strong gains in its bonds after S&P reinstated the country’s credit rating in the previous month following its successful debt restructuring earlier in the year. On the flip side, China property bonds remained the worst performing sector albeit with limited impact on the overall index. Going into November reaction to the Trump-Xi summit on 30th October will clearly have an impact on regional markets as any deal signed should provide a new sentiment driven uplift, although investors will remain highly cognizant of fickle nature of US economic policy in recent months, leaving markets exposed to the risk of sudden unexpected shifts in future. 

MONTHLY PERFORMANCE