[SINGAPORE] Bond investors are keeping their faith in Asia, a region they view as being relatively stable even as an escalation in the trade war threatens to dent global growth.

Asian policy makers have more capacity to support the region's economies, with inflation running below targets meaning that central banks can cut interest rates if needed, according to Aberdeen Standard Investments. Opportunities can be found in countries such as China and Papua New Guinea, where reforms to open up their markets to foreign investors are taking place, NN Investment Partners said.

"Asia is where you'll sleep a little better at night," said London-based Edwin Gutierrez, who manages US$14 billion as head of emerging-market sovereign debt at Aberdeen. He favors local-currency debt in India and the Philippines as they are less directly hit by the trade conflict. "The markets are supported by low inflation and the fact that Asian central banks have a lot of flexibility to ease monetary policy."

Demand for Asia's relative safety comes as investors soured on riskier assets on the back of rising odds of a full-blown trade war between the US and China. President Donald Trump earlier this month delivered on his threat to more than double tariffs on the Asian country, and Beijing responded that it's been forced to retaliate.

Local debt issued by emerging Asia with currency hedges handed investors a return of 1.0 per cent since May 3, as Trump began ratcheting up pressure with plans to raise tariffs on Chinese goods, a Bloomberg-Barclays index shows. That compares with a 0.4 per cent gain in a measure tracking similar debt across global emerging markets.