Dim sum debt leapfrogs rivals to be best in Asia

PUBLISHED : Friday, 28 December, 2012, 12:00am
UPDATED : Friday, 28 December, 2012, 4:14am


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Dim sum bonds were transformed into the best local-currency company notes in Asia this year from the worst in 2011, and are among the top picks of Western Asset Management as China's economy rebounds.

Corporate yuan-denominated securities sold outside the mainland gained 6.2 per cent in 2012, more than returns on local currency company bonds from any other Asian country, according to HSBC indices. Dim sum debt beat the 4.8 per cent on non-government Hong Kong dollar notes and the 4.7 per cent increase in similar corporate debt denominated in Singapore's currency, the indices show. The yuan notes lost more than 2 per cent in 2011, the data shows.

Goldman Sachs raised its 2013 growth expectations for China to 8.2 per cent, after factory production grew faster than expected. Western Asset expects growth of between 7 per cent and 8 per cent, compared with an annual pace of 7.4 per cent in the third quarter.

"China will successfully steer through the global head winds," Chia-Liang Lian, Singapore-based head of investment management for Asia excluding Japan at Western Asset, said at a briefing in Hong Kong this month. Dim sum "bonds are one of several pockets of value that we feel compelled to exercise as we go into 2013", he said.

New World China Land's 8.5 per cent yuan bonds due April 2015, which have the largest weighting in HSBC's non-government index for offshore China debt, returned 11.7 per cent this year. The Hong Kong-based developer of mainland properties is "cautiously optimistic" about the market on the mainland after earnings rose 2 per cent for the year to June 30.

Average property prices may increase by 7.8 per cent next year, according to a report last week from Soufun Holdings, the country's biggest real estate website owner. The government will support home buying for use by the purchaser while continuing curbs on speculation and investment, Xinhua reported last week.

Stimulus measures to support China's economy boosted growth in East Asia's emerging nations this year and may continue to do so in 2013, Bert Hofman, the World Bank's chief economist for East Asia and the Pacific region, said last week. Local-currency government bonds from India, Indonesia and the Philippines all gained more than 8 per cent this year, HSBC's gauges show.

The cost of insuring China's debt against non-payment with credit-default swaps has fallen 82 basis points this year to 65 basis points as of December 26, according to data provider CMA.

The yuan has appreciated 1 per cent this year, as of December 27, less than predicted in December 2011 but still more than the Hong Kong dollar, Indian rupee or Indonesian rupiah.