Fixed income is seen as a key investment opportunity this year, specifically for the US, Europe and Asia, reported UOB Asset Management (UOBAM).

“Despite the high possibility of a US Federal Reserve interest rate increase in the second half of this year, UOBAM anticipates fixed income will remain a key investment opportunity in 2015,” it said in its press statement released at a Jan 13 media conference.

It added that the supply of fixed income bonds is expected to drop in the US and Europe, as the US budget deficit shrinks and European corporates continue to deleverage.

The quantitative easing by the Bank of Japan and European Central Bank will also keep domestic interest rates in those markets low, which in turn will anchor interest rates in the US.

UOBAM also said the local equity market is expected to improve in the second half of the year as oil prices gradually recover. Its chief investment officer Francis Eng added that Asian equity markets are currently trading at reasonable valuations and are expected to improve across most of the region.

“An expected increase in US interest rates in 2015 may create some near-term uncertainty, but Asian economies are now less vulnerable to external shocks,” Eng explained at the media briefing. Historical evidence suggests that Asian markets will eventually rally after a US interest rate hike, he added.

However, Eng also said the performance of the Malaysian equity market has been hampered by low oil prices in the short term. “We continue to expect a bit of volatility in the local equity market until oil prices recover as anticipated in the second half of 2015. In the mean time, the current situation presents investors with opportunities to pick up undervalued stocks with solid fundamentals.”