(Yicai) March 25 -- The People’s Bank of China will probably trim interest rates one or two times in the first six months, reducing them by about 20 basis points in total, as the country’s monetary policy remains expansionary, a senior executive at US fixed-income asset manager Pacific Investment Management Company told Yicai in a recent exclusive interview.

Stimulus measures will support China’s economic performance and fiscal policy will be a strong driving force, said Stephen Chang, who is managing director and portfolio manager at the Newport Beach-based firm, better known as PIMCO. The issuance of government bonds in particular will help offset the negative impact on local governments of tumbling revenue from land sales and reduced borrowing from their financial vehicles.

China’s credit will expand by about 9.5 percent this year from the year before, and structural monetary policy tools will continue to support targeted sectors such as green, high-tech and affordable housing projects, he said.

The performance of China’s bond market this year should be more balanced and neutral than in the past, Chang said. PIMCO is unlikely to greatly alter its positions in Chinese bonds for the moment.

This is because the volatility of the Chinese bond market is low and it is not tied to US Treasuries. Judging from the relationship between current policy, economic growth and inflation as well as cross-cyclical adjustments, PBOC’s stance is unlikely to change much.

China is one of PIMCO’s four main investment destinations in the Asia-Pacific fixed-income market this year, Chang said. The other three are Japan, which ended negative interest rates this month, as well as Australia, India and Indonesia.

Regional Adjustments

PIMCO expects the Reserve Bank of Australia to start slashing interest rates in the second half, Chang said. The central bank of India may remain cautious about cutting interest rates too early, but it is still expected to trim rates by between 25 bps and 50 bps this year. Bank Indonesia’s primary task is to maintain monetary stability and its authorities are expected to slash rates by between 75 bps and 100 bps in 2024.

Around USD200 billion worth of bonds will mature in the Asia-Pacific market this year, and about USD130 billion of new bonds will be issued, Chang said. Therefore, the region will see a net redemption of between USD70 billion and USD80 billion of bonds this year, and supply and demand in the regional bond market should be supported.

PIMCO is optimistic about Macau’s gaming industry in terms of good investment opportunities for bonds, because tourist numbers are up, Zhang said. As a result, the cash flow, output and profitability of businesses in this sector have been very healthy. Their performance should continue to improve and their credit ratings might be upgraded.

Editors: Tang Shihua, Kim Taylor