Asia Junk Debt Has Best Winning Streak In Year Amid China Woes

(Bloomberg) -- Asia’s high-yield bonds posted positive returns for a third month in January, in a sign investors see opportunity in speculative-grade firms despite the turmoil in China’s property sector. 

A Bloomberg index of junk-rated dollar bonds returned 2.6% last month, beating investment-grade debt. That takes the gauge to its longest winning streak in a year. 

Singapore and China topped the list of best-performers followed by India, which got a fillip from Vedanta Resources bonds after tycoon Anil Agarwal’s miner negotiated new debt repayment terms. 

READ: Fed Pivot Good for Carry Trade, Helps HY Debt: BlackRock’s Seth

While the bonds of developers such as China Evergrande Group, which got ordered to liquidate, are trading at deeply distressed levels, others have gotten a lift from Chinese regulators offering more financial support. Any policy easing by the Federal Reserve in 2024 should help Asian firms lower their cost of capital. 

“My portfolio has shifted more toward high yield,” Monica Hsiao, founder and CIO of Triada Capital, said in a Bloomberg TV interview. Once US borrowing costs begin to come down, “high yield issuers will have a better time refinancing.” 

READ: Evergrande Set for Liquidation as China Property Crisis Drags On

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