Chinese companies with potential for improvement in their environmental, social and corporate governance (ESG) scores could be among investment candidates with the biggest alpha potential, BNP Paribas Asset Management’s Paul Sandhu said on the third day of FinanceAsia’s 2nd China Fixed Income Summit.
Sandhu, who heads the multi-asset quant solutions business for Asia-Pacific at BNP, referred to President Xi Jinping’s pledge to steer China towards carbon neutrality by 2060 to suggest that local mainland companies had the most to improve as the nation worked towards that goal.
As more money flows into funds with the ESG moniker, “companies and sectors that are more prone to improving their ESG ratings” were likely to lead market returns, he said on a panel discussion.
Speaking on the same panel, Brad Gibson, co-head of AllianceBernstein’s Asia-Pacific fixed income, said Chinese property sector bonds were “hard to ignore” in the high-yield space, given their yields of around 8% and duration of around 2.7 years.
“For investors globally, who are not used to the Chinese property market, it’s probably still a challenge to get large investments in, but for us regionally, [it’s] a favored market,” Gibson said.
Among other speakers, Lianhe Ratings’ Chief Executive Officer Stan Ho, who previously worked with Fitch Ratings, elaborated on some of the differences between local and global credit ratings agencies.
“The local rating agencies they don’t’ just look at the credit matrix. They actually look at the (issuer’s) skill scale, operating scale or maybe their position in the market as one of the very major important factors in the rating,” Ho said.
Hong Kong Monetary Authority’s Archie Ng, HSBC Global Asset Management’s Cecilia Chan and IFC’s Philippe L Ahoua are among the speakers participating in the upcoming sessions on Thursday. The full day’s schedule can be found here.
