Trump's election victory has understandably elevated concerns over possible tariff hikes for Chinese and Asian exports to the US, on top of higher US fiscal deficits from tax cuts. Beyond an initial upward shock to US bond yields, credit market conditions had stayed benign. Even for Chinese USD credit, spreads had by and large compressed post-elections. Investors are looking past Trump tariff threats, since most Chinese credit are exposed to domestic demand drivers, not external demand.

Notwithstanding external trade threats, China's credit outlook is stabilizing. The NPC Standing Committee has raised the debt ceiling for local governments to issue an additional CNY6trn of special bonds over 3 years, so as to facilitate a debt swap with hidden local debt. Local governments will also be able to tap a cumulative CNY4trn of new special local government bond quotas, to be regularly allocated over the next 5 years, for such debt swaps. Finance Minister Lan said that this should reduce hidden local debt from CNY14.3trn as of end-2023 to CNY4.3trn. China's loan growth and corporate bond issuance has slowed markedly this year, given uncertainty and risks around LGFV debt. China's debt swap, coupled with capital injections to Chinese banks announced earlier, should build confidence and support a revival of credit growth. China's local authorities DACS spread has already eased since late September, with investors becoming more reassured by the recent change in policy tone.

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.