Bryan Collins, Fidelity International
Collins took over as head of Asian fixed income in February 2018, replacing Olivier Szwarcberg. Collins also manages the firm’s China RMB Bond Fund.
He said the macro environment for the property sector in China will remain supportive due to the ongoing industry consolidation.
“This year the property sector will be in a good spot,” he said. “The sector used to be very homogenous. Everything went up or everything went down. What we have noticed in the last couple of years is the dispersion between winners and losers, which are seen spreading out a little bit more.”
Therefore, leading property developers are easier to identify than in the past and he plans to add bonds issued by a Chinese real-estate developer to the fund. The high yield fund, as of the end of February, invests its largest holdings (24.4%) in the real estate sector across Asia, according to FE.
His high yield fund was yielding about 7% in February 2018. Collins added that the fund focuses more on the repeat bond issuers with a rating of B or above, which have a track record of meeting bond obligations through the cycles.
He said going down the quality and rating spectrum, investors will have to expect to “pay for the troubles”. “You do not have to go too far down the credit rating spectrum,” he added.
Onshore bond market
In March, Bloomberg announced the inclusion of China’s onshore bonds in the Bloomberg Barclays Global Aggregate Index.
The index provider said it plans to add Chinese RMB-denominated government and policy bank bonds to the widely-tracked Bloomberg Barclays Global Aggregate Index. They will be phased in over a 20-month period beginning April 2019.
However, Collins said China’s bonds could benefit even more from an effective interest rate policy and monetary mechanism.
“The [attractiveness] of China’s government bonds is not just due to index inclusion,” he said.
He believes China’s central bank effectiveness in adjusting monetary policy is what is really supporting government bonds.
“The interest rate corridor and open market mechanism that is formulated by the central bank in China now tightens and loosens monetary policy much more effectively.”
He said the firm has raised holdings in China’s onshore bonds for their funds because of these improvements in the monetary policy framework.
Three-year performance of Fidelity Asian High Yield Fund versus category average
