Weekly Buzz: China’s rebound | Earn passive income with bonds

🏭 China: Back in business 

China hasn’t looked back after abandoning its zero-Covid policy late last year. Economic activity continued to rebound in February:

• The official manufacturing purchasing managers’ index (PMI) – which measures activity in businesses that produce stuff, like electronics or furniture – jumped to 52.6 from 50.1 in January, its highest level in more than a decade.
• The non-manufacturing PMI – which measures activity in businesses that provide services, like hairdressers or accountants – rose to 56.3 in February from 54.4 in January. (The 50 level separates contraction from expansion.)

With both indices beating economists’ expectations, the data is the first clear sign that the economy and businesses are on the road to recovery after the Lunar New Year holidays. That said, the rebound will likely slow down in the months ahead as global growth slows and pent-up demand from China’s reopening cools.

What are markets paying attention to next?

All eyes will be on the policies coming out of China’s annual National People’s Congress (NPC), which kicks off this weekend. The government is expected to announce supportive measures to boost consumption and help the still-troubled property sector.

🔍 Earn passive income no matter what’s happening in the economy

Bond yields are currently at decade-highs, so it might just be a good time to put your cash to work in a fixed income portfolio to get regular interest payments. 

(Read more in our latest CIO Insights: Why Investing in Short-Term Bonds Makes Sense)

Our USD-based Passive Income portfolio features a 99% exposure to globally-diversified fixed income securities, including global, corporate, high-yield, and long-duration bonds. These assets can help reduce volatility in your portfolios over the long term. In a nutshell:

• It’s customisable, so you can add and remove asset classes any time
• You can choose to cash out or reinvest your dividends
• It’s free until 30 June 2023
• Like all our offerings, there’s no minimum investment amount and no lock-ins

🎓Jargon buster: Credit spread

The credit spread refers to the difference in yield between bonds of the same maturity but different credit quality. It’s measured in basis points (1 basis point is one hundredth of a percentage point), and is commonly used to describe the difference in yield between a government bond and a corporate bond.

How do investors use credit spreads?

1. To assess the creditworthiness of a bond issuer

The yield on government bonds is generally taken as a benchmark (or risk-free) rate. Corporate bonds usually offer higher yields than government bonds with equivalent maturity, to compensate investors for taking on additional risk.

So, knowing the spread between a corporate bond and government bond gives investors a sense of how much additional risk they’re taking when they buy a corporate bond versus a government bond.

2. As an indicator of overall market sentiment 

When markets are more risk-averse, credit spreads tend to widen, since investors want more compensation for taking on risk. And conversely, when market sentiment improves and investors have greater risk appetite, credit spreads tend to narrow.

✨ A quick-start guide to customising your own portfolio

Our Flexible Portfolios let you build your own portfolios from more than 55 different asset classes. If you need some inspiration, our investment team has curated three templates to help you kickstart your journey to customising your portfolios ⚡

You can choose from Passive Income, World Index Tracking, and Risk-focused templates – and tweak them to suit your preferences. Remember, you can add and remove assets, and change your Flexible Portfolio allocations whenever you want!

To see just how easy it is to get started, here’s a video walkthrough covering:

• Three ways to quickly customise a portfolio
• The three templates you can choose from
• How to get dividend payouts from your portfolio

Watch the video