Asian credit markets across China, Hong Kong, Korea, India, and Indonesia have all seen credit spreads compressing towards their lowest levels since the pandemic. Indeed, our Asian ex-Japan DACS index has compressed to a record low of around 110bps. One reason for such tight spreads is limited supply. While Asian corporate USD issuance in 2025 has increased and is on track to reach its highest since 2021, it remains low compared to annual issuance volumes from 2017-2021. Interestingly, Chinese USD credit issuance volume has still not fully recovered. The real state sector continues to see an overhang from excess inventory, with property prices declining for another year, and residential property sales having fallen by 9.4% year-to-date y/y as of October. More broadly, China's investment in infrastructure is also seeing slower growth. Fixed asset investment has fallen by 1.7% year-to-date y/y in October, marking its weakest growth since the 2020 pandemic. Given the soft investment trend, supply of Chinese USD credit could remain modest.

For other Asian markets besides China, historically tights credit spreads are underpinned by low credit default risks. Remarkably, there has not been a single default in Asian ex-China markets so far this year, in stark contrast to US credit markets where the trailing default rate has inched higher. Asian markets have proven surprisingly resilient to tariffs, with the latest IMF WEO report expecting Emerging Asia's 2025 growth to stay little changed from the previous year, despite a seismic change in the global world order and trade landscape. Perhaps the flurry of trade deals and tariff exemptions have cushioned the impact on growth, but valuations of Asian credit do seem a tad high with little buffers.

DBS Aggregate Credit Spread or DACS indices show the aggregate credit spread, weighted by market capitalization and modified duration, for Asian corporate USD-denominated straight bonds. The higher is the DACS, the higher is the additional yield that can be earned in credit, and the higher is the perception of credit risks in markets.

Our first visual shows the notional outstanding of bonds from five Asian economies that comprise the Asia ex-Japan (AXJ) DACS index. These five economies are China, Hong Kong, Korea, India and Indonesia.

The second visual shows the notional outstanding split into industry sectors for the aggregate AXJ DACS index, and DACS indices for each of the five economies. Individual economies can be selected via the dropdown.

Our last visual illustrates the DACS index readings over time for AXJ or an individual economy. It is also possible to drill into the constituent sectors of the DACS indices using the second dropdown. Such sectoral DACS indices are shown on an individual economy basis when data is sufficient, and on an aggregated AXJ basis when otherwise.