A UBS trader's picks of junk bonds issued by Chinese companies are turning out to be lucrative, as high-yield dollar bond issuances by Chinese firms climb to records.
Hong Kong-based Kelvin Zhao has made his employer nearly $30 million this year, according to a report in the «Wall Street Journal» (behind paywall), quoting people familiar with the matter. Zhao is an executive director in the Asian high-yield trading division at the Swiss bank, according to his Linkedin profile.
Zhao is amongst those who have benefitted from a surge in high-yield issuances in Asia this year. In particular, Chinese issuance of these dollar bonds has more than doubled this year to an all-time high as property developers refinance their rising debt burdens via global markets.
Indebted Developers
The value of high-yield dollar bonds issued offshore during the year totaled $51.8 billion to date, representing an increase of 116 percent compared with the same period last year, according to data from Dealogic.
Over 90 percent of Chinese issuance is from heavily-indebted developers such as Evergrande, Country Garden and Dalian Wanda. Their high leverage usually limits them to issuing high-yield debt in international markets. This has helped boost developers’ total offshore dollar debt sales to a record of $67.2 billion this year.
Asian Market Demand
About two-thirds of global high yield issuance had come from Asia this year, concurs Alaa Bushehri, head of emerging markets corporate debt at BNP Paribas asset management arm in London. China has featured predominantly as property developers sought to refinance outstanding dollar debt.
«The real estate sector is very much a domestic story,» said Bushehri, who was quoted in «Financial Times»(behind paywall). Meanwhile, she is keeping an eye on issuers’ ability to navigate industry cycles and the pace of regulatory approvals for offshore debt issuance from the National Development and Reform Commission, China’s state planning agency.
