The recent debt issues by mainland developers in Hong Kong will not result in excessive supply and investors should still consider these high-yield bonds as an attractive asset class this year, asset management firms say.
The spate of junk bond sales, however, is raising eyebrows, on speculation market demand could not digest the glut of issues. Cheung Kong priced its bond at the lowest end of an indicative yield range on Wednesday night, while Agile Property's bonds have been traded below their offer price in the secondary market since being priced on January 11.
But Sean Chang, Baring Asset Management's head of Asian debt investment, said he would encourage investors to buy junk bonds, especially in the property sector. These bonds had relatively high returns and low default risks, he said, as the trend of urbanisation on the mainland could boost home demand in the long term.
Yields of most property developers' bonds in the secondary market are much higher than the 3.16 per cent mainland government debt offers.
Agile's 8.875 per cent note sold in 2010 and due in 2017 is now yielding 6.16 per cent, while Country Garden's similar-maturity 11.25 per cent note is yielding 5.26 per cent.