Asian USD credit spreads have been tight across most markets, except for Hong Kong. Our Hong Kong DACS index has widened by nearly 20bps year-to-date, reaching its highest since February 2024. The move is driven by the real estate sector, which constitutes almost half of Hong Kong's USD credit market. Indeed, Hong Kong's real estate DACS index climbed to a record high of 340bps, following recent news that a developer had to offer its properties as collateral for loan refinancing.

Despite the jump in Hong Kong's aggregate credit spreads, risks are idiosyncratic and not broad-based. Hong Kong's investment grade credit spreads have remained tight, with spread widening largely concentrated within high yield credit. There is also no sign of contagion to Hong Kong's financial sector. Our financial sector DACS index continues to hover at record lows. This suggests that investors are not concerned about exposure to Hong Kong property in general, even if there is greater differentiation of risks at the firm level for real estate credit. Investor confidence could return as leveraged developers make progress in asset sales and successfully lower their gearing.

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.