Bear market opportunities

Beware! Asian perpetual deals are back in town

Once considered bull market products, perpetuals are increasingly becoming a more regular component of a borrower’s arsenal. But are bond investors being lulled into a false sense of security about the asset class again?

When Hong Kong borrowers started executing fixed-for-life perpetuals towards the end of 2016, they initially met strong demand from fund managers searching for additional yield pick up in a declining interest rate environment.

However, institutional investors’ enthusiasm began to wane fairly quickly in 2017 once they calculated that the bond bull market was topping out. This left private banking investors to pick up the slack when a wave of Hong Kong property developers led by Sun Hung Kai, Cheung Kong and Nan Fung hit the market in the late spring of that year.

Those investors must then have spent the whole of 2018 kicking themselves, or...

¬ Haymarket Media Limited. All rights reserved.

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