HSBC Private Banking is bullish on Asia's junk bonds as it expects it to make further gains after a strong rally in the first quarter.
Sales of junk bonds in Asia had a record-breaking quarter as a broad stock market rally and investor expectations for fewer interest rate rises boosted risk appetite.
US currency junk notes in the region have gained 5.6% so far this year, in the strongest start since 2012, according to ICE BofAML data. The private wealth arm of HSBC sees more scope for gains, fueled by Chinese developers that are making progress cutting debt.
"Stealth easing" of Chinese property curbs has also raised hopes of a boost ahead, even as new home price growth diminished for a fourth straight month, Bloomberg reports.
HSBC Private Banking predicts that Asian dollar junk debt could return 14% in 2019 after losses last year, while Asia investment-grade bonds may return 7%, according to Jeffrey Yap, Hong Kong-based regional head of fixed income, currencies and commodities, Asia.
The bank has seen rising demand for bonds from wealthy clients, according to Yap. HSBC is building an UHNW team in Asia, and plans to hire for the new business. The wealth of the 137 people in the Asia Pacific region has jumped by $135bn this year.
Companies in Asia have sold $19.8bn in high-yield - or junk-rated - bonds by 4 March, making it the best start to a year, according to Refinitiv data going back to the 1970s.