High-yield debt holds potential, bank says

Corporate bonds and high-yield bonds offer greater potential for investors, a bank analysis says.

Will Leung, head of investment strategy, wealth management, of Standard Chartered Hong Kong, said there is room for the Hong Kong stock market to rise further as the central banks strengthened their quantitative easing, the lockdowns will be eased in the next half and the rally reflects the trend for the next half.

Leung reckons that Chinese-concept shares, including A and H stocks, will continue to gain.

He suggests investors focus on new economy, health care, and autos.

Gavin Lam, senior investment strategist, wealth management, expects greater potential in corporate bonds, and high-yield bonds with an investment grade.

He says the recent situation is similar to 2000 and 2008, when recovery signs emerged in the economic downturn.

During 2008, the returns of corporate bonds outperformed the stock market.

Besides, Lam says the Federal Reserve will buy bonds in the primary and secondary market directly, which supports bond investment.

He expects crude oil prices to be stable in the next half. This could benefit bonds, as most of the high-yield bonds with a 7 percent return are energy-related.

As for defensive choices, he suggests US dollar bonds in Asia offering 3-4 percent return.

Alison Chiu, director of investment advisory, wealth management, forecast that the British pound, Australian dollar, and euros would appreciate as the US dollar weakens in the next half.

Standard Chartered said the price of gold price could reach a high of US$1,911 (HK$14,906).