The world's biggest asset manager, BlackRock Inc, expects the overall backdrop for risk assets to be positive in 2021, supported by easy money from central banks, with Asia well-poised to lead the post-Covid-19 recovery.
Investors will continue to look for income, yields and returns, Neeraj Seth, head of Asian credit at BlackRock, which manages a record $7.8 trillion in assets, told the Reuters Global Markets Forum from Hong Kong.
"Hence, countries with reasonable fundamentals and good growth potential (will be preferred)," Seth said at the Reuters Global Investment Outlook Summit, 2021.
Some Asian central banks will remain on a neutral-to-accommodative path in 2021, he said, adding that Indonesia, India and Malaysia may have room to ease. Seth expected bond yields in those countries to drift lower next year.
Seth said it would take another 12-18 months before economic activity returned to normal, employment levels recovered and inflation started to rise. For central banks in the United States and other developed markets, he said policy normalisation was not on the horizon.
Seth expected the US 10-year yield to be in the 1.00%-1.50% range by the end of 2021.
The fissure between emerging markets and developed countries will be driven by the fundamental trajectory of these economies and their sovereign balance sheets in a post-Covid-19 world, not by vaccine availability, Seth said.
In that context, he expected Asia to grow faster than the rest of the world, led by China, South Korea, Singapore, Indonesia, Vietnam, and to some extent, India.
"China, (which has) seen a meaningful recovery post-Covid-19, certainly stands out," he said.
The debts of Chinese state-owned enterprises have come into focus following defaults in recent weeks, but Seth dismissed that as "the second chapter of deleveraging" and not a system-wide risk.
He expected a modest increase in inflation as economies revive, monetary and fiscal support continued and supply chains evolve.
"On the other hand, you still have the combination of debt, demographics, technology, which have been and will remain the disinflationary forces in the world," he said, adding that would remove the risk of hyperinflation.
Disclaimer: This interview was conducted in the Reuters Global Markets Forum, a chat room hosted on the Refinitiv Messenger platform