Is the 30% rebound in Asian high yield sustainable? We think not
China’s property sector is still mired in uncertainty and default risk is persistent. Investors should steer clear of Asian high-yield bonds
AS CHINA unleashed a wave of supportive policies for the property sector alongside the reopening of its economy from Covid-19 curbs, Asian high-yield bonds – as measured by the Bloomberg Asia USD High Yield Bond Index – have surged by around 30 per cent since November 2022.
In our opinion, the rally is likely to be short-lived.
Property demand still fragile
China’s crackdown on the property sector may finally be over, but the deepest problems have not disappeared. Supportive policy measures and the post-Covid reopening have failed to restore confidence in the housing market. As it stands, property demand remains fragile.
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