High-yield products to grow amid mild recovery: analysts

By Crystal Hsu  /  Staff reporter

Thu, Nov 29, 2012 - Page 14

The low interest rate environment is set to extend into next year, as the world may only see a mild recovery, lending support to continued popularity for fixed-income products, foreign investment analysts said yesterday.

The global economy is likely to grow 2.9 percent next year, from an estimated 2.8 percent pickup this year, as risks for systematic failure in Europe will subside but linger, said Sun Qi (孫琦), Hong Kong-based economist at AXA Investment Managers Asia Ltd.

Meanwhile, the US and China will recover further from a slowdown as indicated by improved economic data, Sun said.

AXA Investment expects US GDP to increase 2.1 percent next year, from 2.2 percent this year, as job creation is not fast enough, the economist said, adding that China may see a 8.1 percent rise, from 7.8 percent.

Economic recovery coupled with low interest rates will support rapid recovery in below-investment-grade balance sheets, AXA portfolio manager Phillippe Descheemaeker said.

The US high-yield market, for instance, witnessed substantial growth in the last three years as demand for spreads products accelerated, Descheemaeker said.

Separately, DWS Investment GmbH portfolio manager Damien Regnier agreed that high-yield debts fared well this year, but suggested investors could channel some funds to convertible bonds after convertibles outperformed equities last quarter.

The fund house of Deutsche Bank Gruppe recommended raising holdings in convertibles such as telecommunications and utilities, but frowned on Chinese real-estate firms, Regnier said.