SHCOMP could drop further

The lackluster demand for Asian dollar bonds (ADB) is likely to recover as investors who shunned weaker quality notes during the turbulent final quarter of 2018 now see them as too cheap to ignore. This indicates investors will take money out of SCI and invest into ADB junk bonds

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Overall orders fell in the last three months of last year, with demand skewed toward quality names as investors sought shelter amid the worst sell-off in a decade. Yields on Asian junk bonds surged to a seven-year high of 9 percent at the end of November. However, the offers a window of opportunity to look for bargains, according to Aberdeen Standard Investments.
“The story of 2018 was the dramatic widening in Asia high-yield spreads,” said Paul Lukaszewski, head of Asian corporate debt & emerging market credit research at Aberdeen Standard. “The current market is fertile with opportunities to generate attractive returns” and “Chinese high yield remains an outlier in that it continues to offer compelling valuations far above historic averages,” he said.