Dim sum bonds transformed into the best local-currency company notes in Asia this year from the worst in 2011 and are among fund managers' top picks as China's economy rebounds.
Corporate yuan-denominated securities sold outside mainland China gained 6.2 per cent this year, more than returns on local currency company bonds from any other Asian country, according to HSBC indexes as of Monday.
Dim sum debt beat the 4.8 per cent on non-government Hong Kong-dollar notes and the 4.7 per cent increase in similar corporate debt denominated in Singapore's currency, the indices show. The yuan notes lost more than 2 per cent last year, according to the data.
Goldman Sachs raised its 2013 expectations for the world's second-largest economy to 8.2 per cent, after factory production grew faster than expected. Western Asset, which manages US$10.7 billion (Dh39.39bn) of Asian fixed-income assets expects growth of between 7 per cent and 8 per cent, compared with an annual pace of 7.4 per cent in the third quarter.
"China will successfully steer through the global head winds," Chia-Liang Lian, the Singapore-based head of investment management for Asia excluding Japan at Western Asset, said. Dim sum "bonds are one of several pockets of value that we feel compelled to exercise as we go into 2013", he said.
New World China Land (917)'s 8.5 per cent yuan bonds due April 2015, which have the largest weighting in HSBC's non-government index for offshore China debt, returned 11.7 per cent this year.
Sovereign dim sum notes returned 1.2 per cent compared to 2.8 per cent for yuan notes onshore, the indexes show. China's 10-year domestic bonds yielded 3.6 per cent, while top-rated companies pay 5.29 per cent for similar-maturity debt, according to Chinabond indexes.
"Investors are now seeing returns that are actually quite attractive with the positive backdrop of the Asian economy," said Gina Tang, the Hong Kong-based head of debt capital markets for greater China at HSBC. Yuan appreciation "will likely recur next year and yields from bond issues will probably have room to trend down from the current levels," Ms Tang said.
* Bloomberg News