While prices of these junk-rated property bonds – which slumped in September-October last year due to mounting fears of a property crash - have bounced back, Anita Yadav, Managing Partner at corporate bond brokerage SJ Seymour Group, says there is still value in this space.
“Prices continue to remain off their highs seen (early) last year. Country Garden bonds due in 2017 have not recovered all their losses - last March they were trading at $111, now they are $101,” she said.
Morgan Stanley’s Head of Global Corporate Credit Strategy, Viktor Hjort whose favored asset class is Chinese high yield property bonds, says these are becoming “scarce assets”.
“We expect bond issuance from the property sector to remain suppressed for the whole of this year – this reflects improving funding flexibility and reduced funding needs,” he said.
Hjort sees improving cash flow positions for the developers in the second-half of the year, as sales volumes increase. He also expects they will remain disciplined on spending due to the uncertain policy outlook for the sector.
Yadav, however, notes that it is important to be selective when investing in Chinese high-yield property bonds.
She says well-diversified developers that have exposure to second and third tier cities and are focused on mid-market housing - including Country Garden and Agile Property - are safer bets.Page 2 of 3 | Prev Page | Next Page