Fund managers warming up to Chinese property bonds as market in Asia becomes the cheapest in a decade amid pandemic
- Credit spreads are at levels last seen during the euro zone and US debt crisis in late 2011 even after some compression this month
- Green shoots in housing market put some fund managers on alert for values in dollar-based Chinese property bonds
New home sales are recovering, while signs of domestic demand picking up from the depth of the coronavirus-led slump suggest a nascent upturn in the bond market this month has further room to go, according to Fidelity International, which oversees about US$480 billion of assets in Asia, Europe, Middle East and South America.
UBS’s wealth management unit is favouring investment grade developers while AXA Investment Management sees value among shorter maturity notes from Chinese builders.
“Nationwide sales are expected to fall this year, but (we expect) disparity between cities and developers with higher-tier cities and companies with stronger financial fundamentals likely to outperform,” Charlotte Chan, portfolio strategist of intermediary business for North East Asia, said in a note last week.
Like most financial assets, the more than US$1 trillion Asian corporate bond market sold off in March as the coronavirus pandemic worsened last month, sending credit spreads to the widest since the global financial crisis in 2008.