Asian funds buying into Latin America

HONG KONG • Asian investors are getting more adventurous as bond returns in their own region tumble, spurring some to venture as far as Latin America - an area with a track record of political instability and occasional defaults.

"There have been a lot more US dollar issuers from LatAm coming to Hong Kong and Singapore to market their deals," said Mr Ben Yuen, chief fixed-income investment officer at BOCHK Asset Management, a unit of Bank of China.

"Chinese banks and private banking clients are getting very interested in buying these names", given the premiums offered and the overall economic recovery in emerging markets, he said.

Mexico City Airport Trust this week started book-building in Asia for an offering of dollar debt - becoming one of the first issuers from Latin America to do so.

It is a sign of the increasing role of Asian capital, which at one time focused on the accumulation of US Treasuries in official foreign- exchange reserves, and an indication of the potential influence Chinese funds could have if and when China relaxes capital controls.

Even with those controls, Chinese diversification demand had pulled yields on speculative-grade dollar bonds from Asian issuers to an all-time low in April. Latin American junk bond yields are on average over 70 basis points higher than their Asian counterparts.

Among the signs of increased appetite for Latin American debt: DeepBlue Global Investment, a Hong Kong-based cross-asset hedge fund, aims to boost its Latin American bond allocation to 30 per cent of the portfolio, from 10 per cent now.


A version of this article appeared in the print edition of The Straits Times on September 16, 2017, with the headline 'Asian funds buying into Latin America'. Subscribe