‘ASIA BONDS LOSE US$45b MARKET VALUE’

BondEvalue says rising treasury yields, trade war concerns and Chinese defaults have rattled investors

RISING Treasury yields, trade-war concerns and Chinese defaults have wiped out US$45 billion (RM181.8 billion) since the start of the year in the market value of dollar notes sold by Asian and international borrowers, according to Singapore-based BondEvalue.

“High net-worth investors not only saw great losses in their leveraged positions, but also faced difficulties in selling off bonds to cut their losses,” said the firm, which provides bond services to private banks, in a note earlier this week.

Recent defaults on dollar securities by Chinese high-yield borrowers such as China Energy Reserve & Chemicals Group Co and Hsin Chong Group Holdings Ltd had “rattled investors”, said the firm. Global trade wars have also loomed over Asia’s debt markets, with yield premiums on junk dollar notes near the highest in over two years, according to a Bloomberg Barclays index.

The Chinese government’s crackdown on excess debt had led to a “severe liquidity crunch”, especially for high-yield borrowers, according to BondEvalue.

One casualty was Wintime Energy Co, which defaulted on its onshore debt last week. Amid volatile markets, liquidity has waned.

Investors had been exposed to widening bid-ask spreads for 73 per cent of the securities that BondEvalue assessed between January 10 and June 29, it said.

A “staggering” 96.4 per cent of the bonds within its coverage had fallen in value in the first half, said the firm. Outflows from emerging-market notes had also caused spreads to widen significantly, according to BondEvalue.

The firm assessed a list of more than 1,600 notes, predominantly Asia dollar securities. It also included bonds that were typically sold to private banking investors, including international sovereign and perpetuals issued by global banks, according to its BondEvalue founder Rahul Banerjee.