Junk bonds of mainland developers top Nikko's wish list for 2013
Japanese asset manager will boost holdings of real-estate bonds as further curbs are unlikely
Nikko Asset Management (Asia), the biggest asset manager based in the region, is making junk dollar bonds of Chinese developers its top pick for 2013 even after their biggest gain in three years.
China accounted for 37.3 per cent of its US$503 million flagship Asian High Yield fund, up from 26 per cent in March, according to fund data. The share of real-estate bonds rose to 28 per cent from 21 per cent over that time. Tokyo-based Nikko manages US$166 billion in Asia.
Chinese high-yield bonds returned 31.5 per cent this year, the most since 2009, compared with 13.2 per cent in the United States, Bank of America-Merrill Lynch indices show.
"Monetary conditions are easing and sentiment among homebuyers is still positive," Leong Wai Hoong, a fund manager in Singapore, said. As the Communist Party meets to select new leaders this month, he said "economic stability is a priority for the incoming leaders and China is unlikely to implement further restrictive measures".
Bank of China mutual funds are also favouring developers, while ING Investment Management has boosted holdings, after Premier Wen Jiabao's policy of cutting borrowing costs while curbing speculation prolonged a four-year bull run.
Bonds issued by Country Garden, KWG Property, Shimao Property and Agile Property are in Leong's top 10 holdings. His fund returned 18.1 per cent this year and 8.2 per cent in 2011. Five developers are in the top 10 list of a fund managed by BOCHK Asset Management in Hong Kong.