Pacific Investment Management Co is bullish on Asia while Bill Gross, who runs the world’s biggest bond fund at the company, bets against US Treasuries.
Singapore’s dollar should strengthen as central banks in the region use currency appreciation to fight inflation, according to a report by Lian Chia Liang, a portfolio manager for Pimco. The South Korean won and Chinese yuan are “undervalued,” the report said.
“The resilience of emerging Asian countries leads us to be open to adding exposure as attractive opportunities arise,” Singapore-based Lian wrote in the report on the company’s Web site.
Gross, who manages the record US$236 billion Total Return Fund, set a bet against US government and related debt last month, after reducing the position to zero in February, the Newport Beach, California-based company said on its Web site earlier this month. South Korean and India quasi-sovereign bonds are attractive and Indonesia may achieve investment grade within a year, Lian wrote in his report.
Singapore’s dollar strengthened to a record S$1.2421 against the US currency yesterday after the city-state’s central bank said on Thursday last week it would allow further appreciation to combat inflation. The won has risen 3.3 percent in the past month and the yuan advanced 0.6 percent.
“The gradual appreciation trend in the Singapore dollar should remain intact,” Lian wrote. “Despite recent gains, we believe the South Korean won and Chinese yuan remain fundamentally undervalued.”
Pimco is also seeking opportunities to buy credit-default swaps, according to the report.
“We look to add, during periods of generalized market weakness, exposure to high quality sovereigns with strong credit metrics,” Lian wrote.
Pimco’s Emerging Asia Bond Fund, which Lian manages, has returned 6.5 percent this year. The performance beat 97 percent of the fund’s competitors, figures show.
Gross’ Total Return Fund handed investors a 2.1 percent gain this year, outperforming 80 percent of its peers.
The fund holds no Treasuries, the company said on Thursday last week. The securities may lose value because of the threats of inflation and currency devaluation, Gross wrote in his investment outlook for this month.
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