Before the abrupt announcement by Trump to set an additional 100% US tariff on Chinese goods starting 1 Nov, credit markets have been rather strong. Asian ex-Japan USD credit spreads had eased to a record low, reflecting buoyant risk appetite in equity markets, and the limited defaults thus far. Of course, there are pockets of risk and uncertainty in Asia, with Hong Kong real estate credit having been a laggard this year. Still, the resumption of Fed rate cuts, with the first in September and another one or two more cuts for the rest of the year, could alleviate financing pressures on leveraged Hong Kong developers, and support an upturn in property prices.

Indeed, markets are now pricing in a better outlook for Hong Kong real estate credit, with our sectoral DACS index having narrowed from a peak of over 370bps to just under 250bps in October. Hong Kong's Property Price index for private domestic units has gradually recovered to hits its highest in 2025, and prices are clearly stabilizing after three years of decline. With the Hang Seng Index also climbing by over 30% year-to-date, a resurgence of domestic wealth is likely to help the Hong Kong real estate market too. Given this positive backdrop, our Hong Kong Aggregate DACS index could follow other Asian USD credit markets in easing to new lows. Trump's tariff threats, while a concern, may also be seen as just a negotiation tactic that could be reversed. As such, markets may not price in the tariffs fully until nearing the end of October, and before assessing China's response to Trump.

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.