Jingjing: Hello everyone. Welcome to our Q3 Asia Trade Floor update. I’m Jingjing Huang, credit product strategist. Joining me today is our Asia portfolio manager, Stephen Chang. Thanks for being here, Stephen.
Text on screen: Jingjing Huang, Credit Product Strategist
Stephen: Thanks, Jingjing. Great to be back.
Text on screen: Stephen Chang, Portfolio Manager, Asia
Jingjing: Stephen, PIMCO recently published its latest Secular Outlook, Rupture and Resilience. What do you think is the most important message for investors?
Stephen: The longer-term message is that we’re operating in a world with a wider range of possible outcomes.
Text on screen: Wider outcomes, stronger foundations
That’s the “rupture” part.
But the near-term backdrop has also been more resilient than many expected. Growth has generally held up, inflation pressures have moderated from earlier peaks, and central banks still have some room to respond if conditions weaken.
Jingjing: So, a more uncertain world, but not necessarily weaker.
Stephen: That’s right. The world is still harder to forecast, but investors are starting from a better place in fixed income than they were a few years ago.
Text on screen: Higher yields can help income do more of the work
Yields are meaningfully higher now, so income can do more of the work. In our view, investors no longer need to stretch as far for return as they did during the low-yield period.
Jingjing: And what does that mean from a portfolio perspective?
Stephen: It reinforces the case for resilience. High quality fixed income can once again play a central role, providing income, diversification and potential downside protection.
And because outcomes are becoming more differentiated across countries and sectors, active management becomes more important.
Jingjing: Let's bring that down to the regional level. Let’s talk about China. A lot of investors have been waiting for a shift toward consumption-led growth. Is that what we're seeing?
Stephen: Not really. At the moment, there is some policy intention to support consumption and household income, but the broader direction remains supply-side.
Text on screen: China is upgrading its existing growth model
China is continuing to focus on productivity, technology and industrial upgrading. This is less a new growth model and more an upgraded version of the existing one.
Jingjing: Why does that matter?
Stephen: Because China continues to produce far more than it consumes. China accounts for roughly 30% of global manufacturing value-add, but less than 15% of global consumption. That gap still matters for trade, supply chains and global prices.
Jingjing: How does this change the investment case for China?
Stephen: The investment case for China is becoming more selective. It’s less about broad participation in a growth story, and more about identifying areas aligned with policy priorities.
Text on screen: China opportunities are becoming more selective
In credit, that also means being selective. A lot of China’s AI infrastructure is supported by banks and state-owned enterprises, given abundant domestic liquidity. So we don’t see AI as a broad credit opportunity in the same way it may appear in equity markets. We prefer to focus on issuers and sectors with strong liquidity, policy alignment and clearer fundamentals.
Jingjing: China is obviously an important part of the emerging markets universe. But stepping back, has the broader EM story changed as well?
Stephen: I think it has. EM is still a yield story, but increasingly it's also a diversification story. Many EM economies entered this period with stronger policy credibility, more conservative balance sheets and attractive real yields.
Text on screen: EM inflation (excluding China) now below U.S. inflation
One interesting point is that inflation across emerging markets, even excluding China, is now lower than U.S. inflation for the first time in recorded history. That's a very different starting point from past cycles.
Jingjing: On the secular horizon, what does this mean for our EM Outlook?
Stephen: The same forces reshaping the global economy are creating different winners and losers across EM. Some benefit from commodity exposure, others from technology supply chains, and others from stronger policy frameworks.
That means while it’s reasonable to own EM broadly. It also pays to be selective across countries, currencies and credit markets.
Jingjing: Thanks, Stephen, and thank you all for watching. For more details, please read PIMCO’s latest Secular Outlook.
Stephen: Thanks, Jingjing. And thanks everyone for joining us.
Disclosures
Important information
Program recorded on 17 July 2026.
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 Ltd and has not been reviewed by the Monetary Authority of Singapore.
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