Asia High Yield has become an increasingly important asset class, next to US and EU High Yield. The most compelling reasons are better credit metrics, lower default rates and higher spreads compared to the US and Europe. Asia B rated corporate bonds compared to US B rated corporate bonds offer a ca. 300bps higher yield and a shorter duration by ca. 0.7 years. In a recessionary environment is it furthermore important to invest in countries with healthy balance sheets and enough firepower to further support their economies with fiscal and monetary stimulus, which in our opinion is the case in Asia, especially China. With regards to handling the Covid-19 situation one can say that Asian countries, with the exceptions of the Philippines, Indonesia and India, have managed extremely well to contain the virus and put their economies back to work.
China is the largest country and largest trading partner in Asia as well as the second largest economy in the world. It is growing faster than the US or Europe and will be one of the only countries growing this year, expected to be between 1.5-2%. For next year, China expects GDP to grow over 7.5%. The strong push from the government to move China from a manufacturing driven (made in China) to a consumer driven economy (consumed in China) is making investments in domestically driven sectors a long-term compelling trend. During their latest plenary session, China reiterated their “Made in China 2025” plan, where China aims to achieve self-sufficiency in the most important industries, especially in high-tech. In fact, in April 2020, China has overtaken the US in number of patents granted, news that has somewhat gone under in the midst of the Corona crisis.
The world is heavily underweight to Chinese equities and bonds compared to its world GDP contribution. However, the benchmark weights of China in major indexes are rising, which will result in substantial capital inflows into China and the region.
Angsana Bond Fund – Our Positioning
We are managing the fund from an absolute return perspective with the first goal being capital preservation. Beginning of 2020, we already expected a global economic slowdown; hence, we were cautiously positioned in Asia HY having a short duration and being invested in the higher quality names of the Asian HY corporate universe. This was the reason for our outperformance during the March 2020 sell-off, where we lost ca. -7%, vs. the Asian HY market that lost ca. -20% (as well as our positive performance in 2018). As we expect volatility to continue, we want to stay cautiously invested and deploy our cash only in high quality names, who have a sound balance sheet and business models that can withstand a recession over the next 1-2 years. Most of our positions are not dependent on exports, but on internal demand from China/Asia.
China Property Market
As we have a substantial exposure to China Real Estate, we would like to reiterate, that it is a systemically important sector for the Chinese government as it is strongly interlinked with the financial system and household leverage. China properties contribute ca. 30% to the GDP, which compares to ca. 20% from exports and 4% from exports to the US. We believe the fundamentals are healthy, housing sales are up 10% y-o-y from 2019, even after a weak Feb/Mar 2020. The majority of residential property buyers are either first time home owners or upgraders, in addition, it’s difficult to speculate on property as first time buyers need a 30% cash down payment, while second time buyers need to put down a 40-60% cash down payment. Furthermore, the Chinese government has many tools, such as influence over mortgage availability and mortgage rates, price caps, and home purchase restrictions, to either curb or support the residential real estate market.
Overall, we believe the property market will continue to be among one of the more defensive sectors in China HY now, as the market is still driven by continuous urbanization and increase in household incomes.
Our Asian/Chinese RE book has a low beta and we invest very selectively into high quality large cap residential developers in Tier 1, 2, 3 cities with excellent land bank, high cash flow, high profitability, good credit metrics. While the recovery rate in case of default for Asian HY bonds is ca. 40% (similar to the US), the recovery rate for Chinese RE developers is 70-80%, a result of the strong collateral backing for residential properties.
To continue please select your investor category and your country of residence.
Select your Country:
Qualified Investor
This Swiss Fund Platform website is only intended for qualified investors within the meaning of Art. 10 par. 3 and 3ter of the Collective Investment Schemes Act (CISA). Qualified investors are professional clients within the meaning of Art. 4 par. 3-5 and Art. 5 paras. 1 and 4 FinSA as well as private clients who meet the requirements of Art. 10 par. 3ter. In particular, qualified investors are:
- Financial intermediaries under the Banking Act (BankA), the Financial Institutions Act (FinSA) and the CISA;
- insurance companies in accordance with the Insurance Act (ISA);
- Foreign clients subject to prudential supervision such as financial intermediaries and insurance companies;
- Central banks;
- Public corporations with professional treasury services;
- Pension funds and institutions that, according to their purpose, serve occupational pension plans, with professional treasury;
- Company with professional treasury;
- Private investment structures built for high net worth individuals with professional treasury services;
- Institutional clients pursuant to Art. 4 para. 4 FinSA;
- Large companies that meet the requirements of Art. 4 para. 5 lit. a-c FinSA;
- private clients, for whom a financial intermediary within the meaning of Article 4 paragraph 3 letter a FinSA or a foreign financial intermediary subject to equivalent prudential supervision provides asset management or investment advice within the meaning of Article 3 letter c items 3 and 4 FinSA within the framework of a long-term asset management or investment advisory relationship, unless they have declared that they do not wish to be considered as such. The declaration must be in writing or in another form verifiable by text.
LEGAL NOTES
Persons who access information on the website of Swiss Fund Platform AG (hereinafter also referred to as "SFP" or "We" or "Us") agree to the following terms and conditions. Swiss Fund Platform AG acts solely as a platform and does not offer any financial services or advice. The information, newsletters or articles on economic and financial topics published on the SFP website do not constitute an aid to decision-making or a recommendation for economic, legal, tax or other advisory questions, or an offer or invitation to buy or sell investment instruments, to effect transactions or to conclude any legal transaction, and in particular do not constitute investment advice or asset management and cannot replace advice and assessment tailored to the individual case.
For qualified advice, please contact an appropriate professional.
The information published is provided by SFP for personal use and information purposes only and is subject to change without notice. SFP takes great care to ensure that the information contained on this website comes from reliable sources, but makes no warranties (express or implied) as to the accuracy, completeness or timeliness of the information published on the SFP website. In particular, SFP is under no obligation to remove or update any outdated information from the SFP website or to expressly mark it as such.
Swiss Fund Platform recommends that you read this disclaimer regularly in order to familiarize yourself with any changes. The date of the last update is listed below.
ACCESS RESTRICTION BY DOMICILE AND INVESTOR CATEGORY
This Swiss Fund Platform website is only intended for qualified investors within the meaning of Art. 10 par. 3 and 3ter of the Collective Investment Schemes Act (CISA). Qualified investors are professional clients within the meaning of Art. 4 par. 3-5 and Art. 5 paras. 1 and 4 FinSA as well as private clients who meet the requirements of Art. 10 par. 3ter. In particular, qualified investors are:
- Financial intermediaries under the Banking Act (BankA), the Financial Institutions Act (FinSA) and the CISA;
- insurance companies in accordance with the Insurance Act (ISA);
- Foreign clients subject to prudential supervision such as financial intermediaries and insurance companies;
- Central banks;
- Public corporations with professional treasury services;
- Pension funds and institutions that, according to their purpose, serve occupational pension plans, with professional treasury;
- Company with professional treasury;
- Private investment structures built for high net worth individuals with professional treasury services;
- Institutional clients pursuant to Art. 4 para. 4 FinSA;
- Large companies that meet the requirements of Art. 4 para. 5 lit. a-c FinSA;
- private clients, for whom a financial intermediary within the meaning of Article 4 paragraph 3 letter a FinSA or a foreign financial intermediary subject to equivalent prudential supervision provides asset management or investment advice within the meaning of Article 3 letter c items 3 and 4 FinSA within the framework of a long-term asset management or investment advisory relationship, unless they have declared that they do not wish to be considered as such. The declaration must be in writing or in another form verifiable by text.
When accessing the Swiss Fund Platform website for the first time, the user must select his or her country of domicile and confirm the category of investor to which he or she belongs. Access to this website is restricted to professional investors as defined by FinSA, all other persons are not granted access.
PERFORMANCE
Swiss Fund Platform AG and this website serve only as a platform for external third parties who may use it to offer services, obtain information or network.
SFP has no or only limited influence on the services offered by external third parties and does not guarantee their success or performance. Any investment or transaction made in the course of such services is made outside the Platform and at your own risk. SFP is not liable for any damages incurred in this context.
LIMITATIONS OF LIABILITY
Swiss Fund Platform AG disclaims, without limitation, all liability for any loss or damage of any kind, including any direct, indirect or consequential damages, which may be incurred through the use of or access to the SFP website, or any links contained on the SFP website that lead to third-party websites. SFP has no influence whatsoever on the information published on third party websites and excludes any liability in this respect. SFP expressly warns of the risk of viruses and the possibility of targeted hacking attacks. In order to combat viruses, the use of current browser versions and the installation of constantly updated anti-virus software are recommended. SFP disclaims any liability for damages resulting therefrom, in particular for damages caused by viruses, hacker attacks or other manipulations of the EDP system of the Internet user by unauthorized persons.
USE OF THE SFP WEBSITE
The entire content of the SFP website is protected by copyright. You may not reproduce (in whole or in part), transmit or make available (by electronic means or otherwise), modify, link into or use for any public or commercial purpose the SFP website without the prior written permission of Swiss Fund Platform AG.
The use of this website, including any contact forms, does not constitute any contractual relationship between you and SFP or the authors / publishers.
LOCAL LEGAL RESTRICTION
The Swiss Fund Platform Website contains information and documents on numerous collective investment schemes and is intended only for qualified investors in Switzerland and Liechtenstein. The Swiss Fund Platform Website is expressly not directed at any person in any jurisdiction where (by reason of that person's nationality, tax residence or otherwise) the publication of or access to the Swiss Fund Platform Website is prohibited. Persons subject to such local restrictions are prohibited from accessing the Swiss Fund Platform Website. No copies, printouts or stored data from this website may be made available to the aforementioned persons in any other way. Information on collective investment schemes and documents are provided either by Swiss Fund Platform or by the fund company or other companies themselves. If the information and documents are provided by the companies on the Swiss Fund Platform website, they are based on the information provided by the fund companies or other companies in connection with the distribution licenses of the investment funds. Swiss Fund Platform cannot be held liable for incorrect information regarding the distribution license. If the information and documents on the Swiss Fund Platform website are provided by the fund companies or other companies themselves, the fund provider is responsible for the correct distribution licenses.
LINKS TO OTHER WEBSITES
This website may contain links (URLs) to third party websites and social networks. The linked websites and their content are not under the control of Swiss Fund Platform AG. Their accuracy, accessibility and availability are not guaranteed. SFP reserves the right to modify or remove links at any time. Any responsibility for the links and the content of the linked websites and the use of the links and linked content is disclaimed; access to and use of such websites is at your own risk.
INTANGIBLE PROPERTY RIGHTS
The intellectual property rights, in particular copyright and related rights, to this website (text, images, logos, trademarks, files, etc.) are the sole property of the authors / publishers or Swiss Fund Platform AG or other rights holders, unless otherwise stated.
For private, non-commercial use, it is permitted to download, temporarily store (browser cache) and print out the content, provided that it is reproduced unchanged and in full and with reference to the source. Forwarding of printouts for private, non-commercial use is permitted only if the recipient accepts this disclaimer.
Distribution in electronic form is prohibited. The content may not be reproduced, duplicated, copied or distributed in print, electronically or in any other way without the written consent of the copyright holder. This includes, but is not limited to, displaying the content in a frame on a website, creating derivative works, or using the content in any other way for commercial or public purposes. The systematic retrieval or linking of content (automated or manual) to create a collection, database or directory is not permitted without the written consent of Swiss Fund Platform AG.
TECHNICAL DEFECTS
Swiss Fund Platform AG endeavors, but is not obliged, to keep the website accessible and free of technical defects to the extent and for as long as it is published. Swiss Fund Platform AG does not guarantee that the website or the newsletter or other published content is free of harmful components (viruses, worms, etc.).
DATA PROTECTION
You can find all information about data protection in our privacy policy: LINK
UPDATE DATE
This disclaimer was last updated on 08/09/2023.
11/04/2020
Diamond Capital Management (Switzerland) Ltd.