Global asset management firm BlackRock has predicted that bonds of Northeast Asian countries and Chinese real estate will be the best pick for global investors in 2013.

“Asian and emerging market fixed incomes experienced strong inflows in 2012 relative to other fixed income markets, and we anticipate this trend continuing into 2013,” said Joel Kim, BlackRock’s managing director and head of Asia-Pacific fixed income, at a press conference last week.

The Asian fixed-income market will show a positive yield differential against developed markets, Kim said, although Asian credit is cheap compared to that of the U.S. and Europe, notwithstanding the tightening in spreads at the end of 2012.

“Asian sovereign ratings have also been improving with most major Asian sovereign ratings now in the investment-grade range,” Kim said. European countries such as France, Italy, Portugal, Spain and Greece have experienced downgrades.

The general manager expected that the gradual economic recovery in the U.S. would likely continue and increase demand for Asian exports to drive regional economic growth.

Picking Chinese real estate as another key promising sector for 2013 investment, Kim stressed that regulatory reforms in India and China would be crucial in 2013.

Kim advised that investors lessen investment in won-denominated bonds since a rise in the interest rate poses risks, stating that export-intensive countries such as Korea and Taiwan are expected to experience a slight increase in market interest.

If investors wish to chip in for won-denominated bonds, he said, they need to buy bonds with a short-term maturity period.

However, he recommended expanding investment portfolios with strong domestic demand, including Indonesia and India, and betting on bonds denominated in their currency.

“We view regional frontier markets as providing a scope for additional returns and diversification. As a backdrop to this environment, there is a favorable case for further Asian currency appreciation relative to the G3 (U.S., Europe, Japan) currencies,” the Kim said.

By Chung Joo-won  (joowonc@heraldcorp.com)