While Asian equity investors have been taking a bath this year, denizens of the bond world have been making hay.
Overall, Asian high-grade bonds have put on 12 per cent amid declining expectations for growth and inflation and a flight from plunging stock markets.
Among the outperformers have been Telekom Malaysia bonds due in 2010, which have gained 18.52 per cent, and Citic Pacific 2011 bonds, which have risen 17.33 per cent, according to Merrill Lynch.
Hutchison Whampoa's benchmark 2011 bonds, however, have been relative wallflowers, rising only 6.96 per cent. That reflects investor concerns about more Hutchison bonds coming to the market and how the conglomerate will spend US$16.7 billion in Europe alone on third-generation (3G) mobile-telephone technology by 2005.
In fact, Hutchison bonds have seen their spread over United States treasuries widen to 255 basis points from 160 points at the start of the year. That negative performance has been more than offset by treasury yields declining to lows not seen since 1958.
Should investors be worried about unproven 3G raising the conglomerate's credit risk profile or is it all in the price? This question faces fund managers weighing up Hutchison's latest bond offering of up to US$2 billion.
