Baillie Gifford's Co-Head of Asian Fixed Income, Omar Slim, and Sun Daohan, released the mid-year 2024 Asian fixed income outlook, outlining key investment themes, views, and allocations to asset categories. Asian central banks are taking a cautious approach to interest rate cuts, and while rate cuts are still expected in Asian countries, it is unlikely to happen earlier than the Federal Reserve. As expected, support measures for the Chinese real estate sector aim to manage growth and avoid any systemic or contagion risks. It is expected that these measures will have a positive impact on the Chinese real estate industry. Asian investment grade bonds continue to perform well with lower volatility compared to other asset classes. Asian investment grade bonds have delivered positive returns since the beginning of the year. Strong issuance of new bonds in Korea and Japan, with the latter still being an attractive market for investment. Due to bond maturities and coupon payments exceeding new issuances, and overall stable fundamentals, the credit market in Asia is expected to shrink this year. The credit conditions for Asian high yield corporate bonds (excluding the Chinese real estate sector) remain stable, with default rates staying low. Due to past defaults in China's real estate sector, there are pricing inefficiencies in this asset class due to negative market sentiment. It is expected that sectors such as gaming, retail, infrastructure and technology, media, and telecommunications will continue to improve, and companies with lower-cost local financing sources will take advantage of bond buybacks. Caution is advised when assessing the fundamentals of financially strained or defaulted Chinese real estate developers, but a few developers with a large portfolio of rental properties and land reserves in prime cities may transition smoothly and provide investment opportunities. As the Federal Reserve may gradually reduce interest rates, investors should continue to differentiate credit assets based on their sensitivity to financing costs and currency risks.