The Credit Corner EM HC bond allocations – Journey to the West

Research evidence excerpt

The Credit Corner EM HC bond allocations – Journey to the West

9 June 2026

Fixed Income

Credit and Rates The Credit Corner

EM HC bond allocations – Journey to the West Global

◆ Global bond funds have been preferring LatAm and Africa Song Jin Lee, CFA

over GCC and Asia dollar bonds… European & US Credit Strategist HSBC Bank plc

songjin.lee@hsbc.com

◆ …leaving the latter in the hands of local and cross-regional +44 20 7991 5259

investors in Asia and the Middle East Kristian Bolso

Quant Rates & EXD Strategist

HSBC Bank plc

◆ There are some signs of change, but for now, a stickier kristianbolso@hsbc.com

investor base lowers the beta of GCC and Asia dollar bonds +44 20 7579 4854

Tom Russell, CFA

Credit Strategist

Looking beyond the regional picture HSBC Bank plc thomas.russell@hsbc.com

Here’s a well-worn narrative. Global EM bond investors have been shunning Asia +44 20 3359 5666

credit since the Chinese Real Estate market entered a downturn five years ago. And Atul Mishra

Associate

many of these funds are running an underweight position in Asia to pursue Bangalore

opportunities elsewhere. While the data supports this narrative, it also paints a more

nuanced picture, one where global forces matter just as much as regional events in

shaping cross border capital flows.

First, global investors’ retreat from Asia credit is part of a broader reallocation out of

EM EXD following the Fed’s tightening cycle in 2022. Second, Asia is not alone in

seeing its share of portfolio allocation drop since 2023. We observe a similar trend in

GCC dollar bonds too, and they overlap with a period of narrowing global spreads.

This points to a deeper force at work – a search for yield in higher beta markets in a

bid to outperform benchmarks. Third, reduced allocation among global investors