Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Funds see promise in battered Chinese real estate dollar bonds

Stock MarketsJan 24, 2022 03:50AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters.

By Samuel Shen and Andrew Galbraith

SHANGHAI (Reuters) - Beaten-down dollar bonds issued by Chinese property developers are enticing domestic and global fund managers, some of whom are even planning to launch new funds targeting bargains as Beijing relents in its concerted drive to clean up the sector.

Jupai Holdings Ltd, a Chinese wealth manager, plans to start a fund to bet on such offshore Chinese property bonds.

"I think roughly half of the developers' dollar bonds were slaughtered by mistake," Jupai Chairman Jianda Ni said.

"We will spot value in what others dumped as trash."

The investment appeal of the fallen angels in the property sector has grown on the heels of moves by China to ease some of the financial and regulatory constraints it imposed last year.

Curbs on borrowings by big real estate developers have driven China's property sector into a crisis, with China Evergrande Group at its forefront. Once China's top-selling developer, it has around $20 billion of international bonds, all deemed to be in default.

A Markit iBoxx index tracking China's high-yield real estate dollar bonds tumbled as much as 19% in January, following 2021's 38% slump.

The selloff, which began in October with Evergrande, accelerated as other developers such as Kaisa Group and Shimao Group defaulted or delayed bond payments.

Paula Chan, senior portfolio manager at Manulife Investment Management, also sees "pockets of opportunities" as the real estate sector moves "from the bottom of the policy tightening cycle".

"The high-yield space presents a lot of opportunities, especially for distressed investors," Chan said.


China has in recent months rolled out several policies to stabilise the slowing economy, including a cut in mortgage rates, stepped-up approvals for developers' bond issuance, and government support for property acquisitions.

Fengshi Capital, a Chinese vulture fund manager, started buying developers' junk bonds late in 2021, and is considering doubling down on such bets this year, said a source with direct knowledge of the fund's plans who declined to be identified because the source was not authorised to talk to media.

Wealth manager Jupai's Ni says the firm's new fund will buy heavily discounted bonds that will mature shortly, betting they will not default. Such a strategy is based on a deep understanding of Chinese developers, as well as the character of their bosses, said Ni, who has worked for more than three decades in the Chinese real estate sector.

Ni declined to name any targets, but said many undervalued bonds are in the range of 70-80 cents on the dollar.

Roughly half of the dollar bonds issued by Chinese developers trade below 80 cents on the dollar, according to an estimate by Essence Securities last week. Some bonds issued by major developers currently yield more than 60%.

Mike Kelly, global head of multi-asset at the $140 billion asset manager PineBridge Investments said last week that the fund had started buying offshore Chinese property bonds and expected authorities' measures to stabilise the market would deliver "extraordinary" returns.

Kelly declined to name companies. Having started to buy at the end of December, he said he was still "in the accumulation stage", picking up securities at 75-85 cents on the dollar.

Jean Charles Sambor, head of emerging market fixed income at BNP Paribas (OTC:BNPQY) Asset Management, also expects "significant easing" in China's real estate policies, and the asset manager too is building a long position in the sector's debt.

Funds see promise in battered Chinese real estate dollar bonds

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Sidney Glover
Sidney Glover Jan 24, 2022 6:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what does high yielding bonds mean when they are not paying? Bets is the correct word. more pain to come in March
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email