Hong Kong: Emerging market bond investors seeking shelter from an economic slowdown in China can flock to Indian investment-grade dollar bonds, according to JPMorgan Chase & Co.

“For EM investors, India IG could present itself as a China hedge for their non-Asian exposure," wrote the bank’s analysts including Varun Ahuja in a note dated 23 August. A China slowdown could spur a commodity slide and affect the broader EM markets, which in turn, benefits India’s macro story, they said.

While Indian high-grade bonds look “fully valued" when compared to China’s BBB-rated state-owned enterprises, especially the 7-8-year part of the curve, they don’t look tight in the context of the broader emerging-market BBB credits, the report said. That’s because India’s sovereign’s macro position is much stronger than that in 2013, it said.

“With our view that India should be able to maintain its mid to low BBB ratings and since we do not see much pressure to that, we think India’s current levels look fair versus EM peers," JPMorgan said.

However, the same cannot be said for some of the Indian junk corporate space since they are “heavily represented" by the commodity-related credits, according to the note.