Live broadcast transcript (Part 2) | A recording of the peak of fixed income dialogue questions and answers, a full collection of Tiantan's golden sentences! (Q&A)

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[Fixed Income Peak Dialogue: Taking the pulse to nugget high returns in an extraordinary year]

Live replay:

https://q.futunn.com/feed/106454047523620

Qabin Standing

Hou Mingwei, Managing Director of Gao Teng International and Head of Fixed Income Investment

Zhang Jihao, Head of S&P Global Ratings Greater China Corporate Rating

Li Chao, Executive Managing Director of China CITIC Bank (International) and Head of Global Financial Markets Department

Tang Haili Credit Bond Trader at Standard Chartered Bank (Hong Kong)

Record of the fixed income peak dialogue live investor exchange questions and answers

1) What impact will the opening of Southbound Bond Connect in the second half of the year have on market liquidity?

Deng Haili:

1. The risk appetite for the market and demand for various types of assets will increase to a certain extent. Because there are still many bonds and distressed bonds that have been mistakenly killed, if some incremental capital comes to the market from within the country, market activity may increase further.

2. It also has a certain effect on improving market sentiment. Compared to other high-yield bonds, the yield on China's high-yield bonds is quite impressive. If funds with good knowledge of credit entities enter overseas markets, it is expected that the yield will narrow to a certain extent. Moreover, we can also see that it is difficult for the short-term yield of some well-qualified bonds and benchmark bonds to fluctuate greatly.

2) It is now difficult for domestic housing enterprises to obtain financing domestically. Can they still maintain the previous high interest rate level?

Zhang Jihao:For high-yield bonds with lower ratings, there is a big difference in domestic and overseas coupon interest rates. In the future, after North-South Connect, this phenomenon is expected to slowly fade, because after interest rates are assimilated, the interest to be paid will be relatively lower, which is beneficial to corporate financing.

Hou Mingwei:Overall, I am very confident about this sector. Although the downsizing period is a bit long, it may continue until next year, and I will still be careful in terms of operation and deployment. If 15% is a high yield, no one will dare to buy it; if it is about 13-13.5% overseas, this is a relative limit. Furthermore, measures such as the “three red lines” are a good thing in the medium to long term. Deleveraging can promote the healthy development of the industry and avoid some inappropriate financing.

3) How do you view the development of overseas investors investing in Chinese bonds?

Hou Mingwei:From the perspective of market participation, Chinese investors have generally bought Chinese bonds over the past 5 years. However, since last year, some overseas investors, especially European and American investors, had previously been relatively underrated in Asia, and have taken advantage of the opportunity to enter the market.

I would also like to ask Mr. Li Chao, will the 144A distribution volume be a little higher?

Li Chao:Over the past few years, starting in 2013/14, investors with Chinese backgrounds played an important role, so when issuing overseas bonds, many issuers preferred the ReGS method and did not choose the 144A market.

However, as issuers host more and more global roadshows, more and more European investors are beginning to participate in the Asian bond market. In particular, issuers that have been active in the bond market for 5 or more years have indeed seen quite a few investors from outside Europe and the US participate during the issuance. However, for some newer issuers, European and American investors lacked understanding, and the proportion of overseas investors participating was relatively low.

Zhang Jihao:ESG (green bonds) has just been mentioned. It is the most developed in the European market. Some foundations restrict investment targets from purchasing green bonds only. I've learned that some fund managers have positive expectations for the Asian market. The problem at the beginning was that there were few items that could be purchased, and restrictions came from the Asian market for more and more green vouchers. Beginning at the beginning of this year, an average of about two new green bonds were issued every week, and occasionally four. Therefore, in the green bond section, issuers in Asia and China will get a new channel, and green bond investment managers will pay more and more attention to Asia.

4) Is it better for ordinary investors to allocate high-yield assets in Asia and buy high-yield bonds directly? Is it better to buy a high-yield bond fund?

Deng Haili:Do what you can, and choose based on comparative advantage. If you have a deep understanding of an investor, you can choose a single voucher. If you have limited energy or limited access to research information, you can choose Star Fund or a fund managed by a Star Fund manager, and you will get a higher risk-return ratio.

Li Chao:

1. Direct purchases on their own have certain limitations: Investments in overseas dollar bonds are generally at least about 200,000 US dollars. Judging from this minimum investment scale, excluding investments of hundreds of millions of US dollars, it is difficult for individual investors themselves to spread risk on a large scale.

2. The benefits of buying a Star Fund or a fund from a professional manager:

a. Risk diversification

b. Helps you choose the right bonds or choose the right time to buy or sell these bonds

5) How should I choose funds related to Asian high-yield bonds? It mainly depends on what factors

Zhang Jihao:For risk research, it mainly depends on the quality, experience and background of the company manager's operation. Choosing a fund is the same. Choose fund managers with rich experience, steady investment operations, and good long-term performance.

Hou Mingwei:This includes some institutional investors choosing funds themselves. The indicators they focus on include Sharpe Ratio (Sharpe Ratio), Sortino Ratio (Sortino Ratio), evaluating downside risks (downside risks), managing the downside risk of the portfolio, and achieving optimal risk-adjusted returns for investors.

Li Chao:It is essential to find a fund manager who has long-term investment experience, can perform stably in different market environments and market environments, and even achieve returns that exceed the market level. Different fund managers have different styles, and different fund managers perform differently in different environments. I believe that fund managers like President Hou who have experienced many bull and bear rotations can bring investors a different experience.

6) After the Sino-US trade war, China paid more attention to developing trade markets with neighboring Asian countries, to what extent would it benefit high-yield Asian bonds?

Hou Mingwei:Currently, most of the trade war is being sanctioned against investment-grade companies, which have little impact on high earnings. There may be some emotional effects in the future, and the focus is on grasping and adhering to the timing of admission.

7) On high-yield investment topics in Asia.

Hou Mingwei:I've just talked about three, adding to the fourth investment theme: since we have entered the cycle of a bull market, we need to find some upgraded sectors or credits, and we can obtain rich capital benefits by adjusting and upgrading. We think Single B (Level B) is a good sector because in Asia, there are quite a few Single B credits of 10% or more. Once upgraded to Double B (BB level), there is room for the 400 basis point spread to narrow. Multiply by a period of three to four years, you can get good capital gains.

A word of congratulations:

Deng Haili: Do your homework and trade boldly.

Li Chao: Compared to high returns in the US, Europe, or other asset classes, high returns in Asia provide the market with lower risk and more impressive returns. I wish all investors a perfect result.

Hou Mingwei: Investing in Asia with high returns depends on timing and both offense and defense. When market sentiment is poor, we must be careful to avoid lightning and lose less when we win. When the mood is good, we must be keenly grasped, seize good opportunities, do our homework, and win in the midst of chaos.

Zhang Jihao: For investors, the most important thing is “reality.” When choosing a company, really look at whether the management and performance are really good, and do a good job in risk management. Problems may occur if you rely on expected investment or speculation without the company's strength to support it.

$GaoTeng Penguin Asian High Yield Fund (IE00BLDGL423.MF)$ $GaoTeng Penguin Asian High Yield Fund (IE00BLDGL753.MF)$

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