Credit market performance across Asia has diverged markedly between North and South Asia this year, with elevated oil prices amid stalled US-Iran negotiations exacerbating the disparity. Reflecting greater vulnerabilities to energy prices, USD credit spreads in India and Indonesia have widened year-to-date. In contrast, USD credit spreads in China, Hong Kong, and Korea have continued to tighten. Within North Asia, Hong Kong has been the standout performer, with our DACS index tightening by more than 25bps to reach record lows. In addition to its lower exposure to oil price shocks, Hong Kong is benefitting from a significant improvement in economic fundamentals this year.

Questions once raised by international investors regarding Hong Kong's future as a leading global financial centre have now been decisively put to rest. Across capital markets, more than 100 companies have listed year-to-date, raising over USD 40bn and already surpassing the territory's full-year 2025 IPO proceeds. Equity market activity has been supported not only by a wave of listings from technology firms focused on AI and robotics, but also by companies spanning a broad range of sectors. Meanwhile, the property market is rebounding steadily. Secondary residental property prices have risen by around 20% since March 2025, while the Grade A office vacancy rate has also declined to its lowest level in 31 months. Further supporting positive market sentiment is new legislation aimed at strengthening Hong Kong's asset management industry, which grants tax cuts on carried interest linked to performance-based compensation. Taken together, these developments suggest that Hong Kong's outlook as a financial hub is as bright today as it has been in many years.

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.