Despite the fall in China’s property prices over the past eight months and growing worries over the financial health of its developers, investment strategists tell CNBC they are bullish on junk bonds issued by the country’s large real estate firms.
“(Chinese) property bonds are some of the best opportunities out there - they offer 10 to 20 percent yield,” Eddie Tam, Chief Investment Officer at hedge fund Central Asset Investments told CNBC.
“In our analysis, most, if not all of the developers will be able to repay or refinance their debt. They have the most straight forward and valuable assets – land – it is simple and doesn’t depreciate. I think the risks are overstated,” he said, adding that sales momentum is picking up after falling in the first four months of the year.
Data in recent weeks have hinted at a turnaround in the property sector. Earlier this month, China’s National Bureau of Statistics reported that May home sales rebounded for the first time this year, rising 19 percent to 375.7 billion yuan ($59 billion) from April.
“Despite the bearishness about the property market, it’s still the asset class of choice in China. Buyers are responding well to the price cuts (by developers), sales are holding up pretty well,” Tam said.Page 1 of 3 | Next Page