Q4 2025 Update from the Asia Trade Floor
Jingjing: Hello everyone, I’m Jingjing Huang, credit strategist. Here with me today, we have our Asia portfolio manager, Stephen Chang. Stephen, thanks for joining us.
Stephen: Thanks, Jingjing. Great to be here.
Jingjing: Let’s start with the big picture. We just published our Q4 Cyclical, titled “Tariffs, Technology, and Transition”, which highlights a real clash of forces shaping the global economy. Can you tell us more about those forces, and what do they mean for investors?
Stephen: We see three major forces colliding. First, trade frictions gave the economy a temporary boost earlier this year as companies rushed shipments ahead of new tariffs. That front-loading created a mini boom, but now we’ll probably see the payback, with additional risk that escalation can happen quickly again on short notice.
Text on screen: “Delayed tariff effects set to bite”
Second, a strong tech investment cycle is providing a buffer. Spending on AI and infrastructure is helping offset some of the capital expenditure weakness elsewhere, especially in the U.S. and China.
Text on screen: “Tech investment provides support amid signs of weakness”
Third, institutional challenges are adding uncertainty. Political pressure on central banks such as the Fed could increase volatility and widen the gap between winners and losers globally.
Text on screen: “Challenges to institutions contribute to uncertainty”
Jingjing: Given that backdrop of trade headwinds, tech tailwinds, and central bank easing, what are the key investment takeaways?
Stephen: One big theme is locking in bond yields. Yields are still attractive, and with central banks likely to cut rates, we expect bonds to outperform cash over the coming year.
So, we’ve been adding some duration in portfolios – favouring short to intermediate maturities. This enables us to capture today’s yield level, while securing potential future income if rates fall further.
Text on screen: “Bond yields offer durable opportunities, while cash rates are poised to decline”
Another takeaway is that global diversification is critical. There’s an unusual abundance of yield across regions – Europe, emerging markets, parts of Asia. By diversifying across regions and currencies, investors can fortify their portfolios and tap opportunities beyond the U.S.
Text on screen: “Global diversification can enhance outperformance potential”
Jingjing: You mentioned China earlier. How are these global forces playing out in China? What’s our outlook there?
Stephen: China’s economy is cooling. The export surge from earlier in the year has faded, and domestic challenges like the property slowdown persist.
The PBOC has responded with targeted easing, and we expect more if growth stays soft. Chinese yields have risen recently, partly due to a rotation into equities, but we saw that as an opportunity.
We added to our China bond positions at higher yields, going overweight duration. With inflation low and monetary policy support still likely, we think those yields have room to fall.
Jingjing: On the corporate side in China, several large tech firms have recently tapped the bond market.
Stephen: That’s right. The capital market is open and active in Hong Kong. Tencent issued offshore bonds, for example, and Alibaba raised over $3 billion in a convertible deal. These issues received a strong investor response, which tells you there’s confidence in those companies and China’s tech policy push.
Jingjing: Clearly, China’s policy and market dynamics are creating both challenges and opportunities. That brings us to a broader question – with spreads so tight, how and where are we seeing value in credit?
Stephen: Spreads are tight to U.S. Treasuries due to the deteriorating U.S. government balance sheet, while corporate issuers continue to show healthy credit metrics.
We’re taking a continuum view of credit – looking across public and private markets for relative value. Traditional investment grade credit is expensive, so we’re looking at other areas, such as asset-backed finance and other high-quality structured opportunities that offer more spread.
Text on screen: “Relative value can be a guide across the public–private credit continuum”
We also selectively use private credit deals to capture value that isn’t available in the public market. At PIMCO, we have deep relationships and expertise, so we can often approach issuers directly and structure deals to meet specific investment objectives.
Jingjing: Can you give us an example?
Stephen: Sure. We worked directly with a high-yield rated sovereign in emerging Asia on a funding deal. They needed to raise capital for strategic development initiatives.
By anchoring the deal early, we secured a meaningful spread pickup over their public bonds. It was the same credit risk, but with differentiated pricing and structure.
Jingjing: That’s a great story – and it really highlights how we strive to find extra value for our clients. Thank you, Stephen, for sharing your insights.
For more, please read our full Cyclical Outlook, “Tariffs, Technology, and Transition” on pimco.com. Thanks for watching and see you next time.
Disclosures
Important information
Program recorded on 13 October 2025.
Past performance is not a guarantee or a reliable indicator of future results. The projections and forecasts in this presentation are predictive in nature. The actual results may differ materially from these projections.
This video is issued in Hong Kong by PIMCO Asia Limited and has not been reviewed by the Securities and Futures Commission. This video is issued in Singapore by PIMCO Asia Pte Limited has not been reviewed by the Monetary Authority of Singapore.
All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Management risk is the risk that the investment techniques and risk analyses applied by an investment manager will not produce the desired results, and that certain policies or developments may affect the investment techniques available to the manager in connection with managing the strategy. The credit quality of a particular security or group of securities does not ensure the stability or safety of an overall portfolio. Diversification does not ensure against loss.
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