Investors are overly pessimistic about the corporate bond market in mainland China despite the better returns it offers, according to Value Partners Group Ltd. (00806.HK).
Chinese bond yields have a 350 basis point premium over those of similar US debt offerings, the Hong Kong Economic Journal quoted Value Partners fund manager Gordon Ip Ho-wah as saying.
Chinese bonds remain the fund’s top pick despite isolated negative episodes such as the default of Kaisa Group Holdings Ltd. (01638.HK) and the corruption scandal at Agile Property Holdings Ltd. (03383.HK).
Ip said Kaisa’s default does not reflect the complete picture in the market, adding that the central government is now careful in pursuing its anti-graft campaign so that the operations of affected companies are not affected.
He also noted that estimates of the likelihood of default run at 23.7 percent for BB-rated Chinese bonds and 30.6 percent for those with B rating, but the actual default rate of Asian high-yield bonds was only 2.1 percent in 2013.
Such default risk estimations obviously exaggerate the actual situation, Ip added.
Translation by Vey Wong
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