Transition credit review: Asia YTD 2026

03/08/2026

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This report forms part of AFII's Transition Credit Review series and provides a year-to-date assessment of Asia's transition credit markets, covering the region's multi-currency GSS market development and USD bond market performance across Emerging Asia, Australia and Japan. Asian USD credit spreads have tightened year-to-date despite a sharp widening episode linked with geopolitical volatility and oil-supply concerns, with the subsequent recovery masking substantial differences across sovereigns, sectors and issuers.

Three transition-related themes stood out. Sovereign markets diverged during the oil shock, while energy-import vulnerability reinforced the case for domestic renewable-energy and grid investment. Supportive commodity conditions allowed fossil-linked issuers to retain market access despite longer-term transition exposure. AI strengthened technology-sector performance while increasing forward-looking power demand.

Primary markets stayed open throughout, with Asia USD issuance reaching USD245 billion at end-July and GSS bonds accounting for 9% of total supply.

Sovereign spreads widened sharply across the Philippines, Thailand and India during the oil shock, while Indonesia's underperformance reflected governance concerns. Both still returned to well-oversubscribed deals in June.

Commodity strength supported near-term credit for fossil-linked issuers like Whitehaven Coal and San Miguel Global Power, even as structural transition risks remain unchanged beneath the surface.

AI-linked demand supported semiconductor, memory chip and digital-infrastructure credits across Emerging Asia and Japan, even as AI-linked equities saw sharp volatility in July. NAVER, Tencent and NTT all returned to market on AI and data-centre strategies, while Korean utilities, Tohoku Electric and PLN issued to fund related power infrastructure.