Fidelity sees bargains as 98% of Asia bonds sinkThe worst corporate-bond rout since the credit crisis left 98 percent of Asia’s dollar-denominated bonds sold last quarter at a discount, a sign to Fidelity Worldwide Investment it’s time to buy.
A total of 60 bonds issued by borrowers from China to India and Indonesia in the past three months are now trading below their sale price, with six of the 10 biggest declines coming from investment-grade companies that sold longer-dated notes. China Petroleum & Chemical, Asia’s largest refiner, led the retreat as the $500 million of 30-year bonds it issued in April fell almost 16 cents on the dollar through June 30, according to data compiled by Bloomberg.
While speculation the Federal Reserve will start paring its unprecedented bond buying and China’s clampdown on its shadow banking system triggered a global sell-off that pushed borrowing costs in Asia to a 12-month high, the exodus is now giving debt investors a chance to scoop up bargains, according to Fidelity’s Bryan Collins. The extra yield investment-grade bonds from Asian companies offer over U.S. Treasuries rose to 2.34 percentage points on June 26, the most since September, according to Bank of America Merrill Lynch.
“Spreads are actually quite attractive, especially for some of the higher quality names where you can be very comfortable about the credit and the stability of the business,” Collins, a Hong Kong-based money manager at Fidelity, which oversees $248 billion, said in a telephone interview. “It does absolutely present a buying opportunity” for investors who can protect against rising yields, he said.
Fidelity is adding to its Asian debt funds some high-quality bonds that are less sensitive to the economy, Collins said. Looking in the medium to longer term, A rated and AA rated large companies that are systemically important and related to state-owned enterprises are attractive at current spreads, according to Collins.
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