Cautious outlook on Asia credit

Looming headwinds are likely to challenge the Asia credit space during the remaining months of the year, encouraging investors to move up the credit curve.

Deteriorating cash generation, tougher borrowing conditions in addition to already leveraged balance sheets open up a new downside for Asian credit, according to Morgan Stanley in a research note on March 18. This is especially true for the high-yield sector.

“We are cautious and view this as a decompression environment,” said Viktor Hjort, credit analyst at Morgan Stanley, in a telephone conference call on Tuesday. “The environment for global credit is still reasonably benign and better than it is in Asia, and...