US and Asian equity markets had a solid start to 2026, with almost all markets (except India's) showing year-to-date gains. Likewise, Asian credit markets are also seeing spreads hovering at record lows. Markets remain sanguine despite Trump having threatened to impose secondary tariffs on nations trading with Iran, which possibly includes China and India. Strong performance in the semiconductor sector has been supportive, but conditions could be turning exuberant. Surprisingly, Chinese regulators are taking steps to temper speculation. On 14 January, China announced that margin financing requirements for onshore equities will be raised to reduce leverage, starting 19 January. Meanwhile, reports are emerging that Chinese ETFs that were previously accumulated by state investors are seeing outflows. While state investors' equity sales may not necessarily dent the market too much, it does convey the message that risk sentiment should be dialled back.

Are there implications for China credit? One possibility is that official support for state-linked credit may be less readily available than before, since there is ostensibly a lesser need to support market sentiment now. For distressed credit, restructuring may even be encouraged, as had occurred for one high profile Chinese developer recently. If so, there could be upward pressures on credit spreads for state-linked credit. Another implication is the impact on non-performing loan recognition for financial credit. Given robust market sentiment, Chinese banks could be encouraged to more proactively tackle distressed loans or take write-offs. Lesser forbearance could be constructive for financial credit though, if they are seen as providing greater clarity on portfolio performance.

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.