US fund manager buys up China debt

US bond manager Muzinich & Co. believes that Beijing’s incremental stimulus efforts to support the modest economic recovery will yield positive results with patience.

The company highlights China’s previous measures and a new funding package, including 1 trillion yuan ($139.3 billion) in special ultra-longterm treasury bonds and 3.9 trillion yuan ($543.3 billion) in special bonds for local governments, stating that the impact will take time to materialize.

“Part of the policy caution to adding more measures is to see whether what they’ve already implemented has any impact to avoid [overstimulation],” he told The Australian Financial Review during a visit to Sydney. Muzinich has $35 billion in credit under management.

A “bazooka-style” economic package is unlikely unless the Chinese economy significantly worsens, according to Muzinich & Co. The company expressed confidence that China will achieve its 5-percent growth target for the current year.

“People may be disappointed about 5 percent in growth given where it has been in the past, but in a global context, 5 percent is still one of the top growing countries.”

The fund manager favors companies that thrive on China’s domestic economic growth, particularly in the tech, restaurant, retail and business services sectors. These sectors have seen credit rating upgrades and positive earnings.

Additionally, the manager is optimistic about China’s electric vehicle (EV) market, attributing it to normalized supply chains, pent-up demand from excess savings and the government’s tax relief program.

“There is an EV momentum, and Asia is the leader of that industry the top 10 battery producers are Chinese, Korean and Japanese,” he added.