SINGAPORE, Sept 18 (IFR) - Asian credit trading was cautious ahead of the Federal Reserve policy meeting beginning tomorrow, even though traders do not expect any big announcements. Japan was off for a public holiday, contributing to lower trading volumes.

The Asia ex-Japan iTraxx investment grade index was flat at 72bp/73bp, with Korean CDS half a basis point wider at 67bp/68bp. The cost of credit protection is currently higher for the Korean sovereign than for China or Malaysia.

With no major news from North Korea over the weekend, Korea Development Bank's 2023 notes tightened 2bp today to Treasuries plus 104bp, while Shinhan Bank's Tier 2 bonds were flat at a spread of 169bp.

"We were underweight Korea, but the recent widening has made spreads more attractive," said a fund manager.

In contrast, Chinese investment grade state-owned credits have tightened in recent weeks, ahead of an expected US dollar issue by the sovereign.

Sinopec's 3.625% April 2027 bonds were quoted at Treasuries plus 130bp on June 12, the day before China announced plans to sell offshore sovereign bonds.

They have since rallied to Treasuries plus 111bp, having tightened 1bp today. State Grid's 2027 bonds were around 1bp tighter at Treasuries plus 97bp, having been at Treasuries plus 122bp before the sovereign deal announcement.

Cifi Holdings' perpetual bonds callable in 2022 were bid at par, yielding 5.4%, after Fitch upgraded it to BB from BB-. High yield was generally little changed, as investors waited for new issues, said a credit trader.

(Reporting by Daniel Stanton; Editing by Vincent Baby)