HSBC Global Asset Warns of Traps in China's Junk Bond Market
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Yields on Chinese dollar junk bonds may look juicy, but investors could face losses as defaults climb, according to HSBC Global Asset Management.
“Investors are not paid to take most of the double-digit yielding names, especially those from over-capacity and small-scale privately owned enterprises which are also vulnerable to liquidity-chain disruption,” said Alfred Mui, head of Asian Credit at HSBC Global Asset Management in Hong Kong. “The potential capital loss may far exceed that of the carry earned over the remaining bond life,” he said.