Samsung Asset Management Co. is considering setting up its first Asian bond fund to tap investor demand for assets that can best withstand Europe’s debt crisis.
A fund may be started within a year and securities in China, Malaysia and Thailand are of interest, said Kim Youngsung, head of the fixed-income division at South Korea’s biggest fund manager, which oversees 124 trillion won ($107 billion). Samsung Asset’s overseas debt investments are currently limited to Australia, Brazil and Dim Sum bonds, which are denominated in yuan and sold in Hong Kong.
“Asia looks better than other regions now with good growth potential and inflation stabilizing,” the Seoul-based Kim said in an interview on June 25. “China has a big domestic market, and Asian countries have become less sensitive to the economic situation in the U.S. and Europe.”
Asian economies will expand 6 percent this year, compared with growth of 2.1 percent in the U.S. and a 0.3 percent contraction in the euro-area, the International Monetary Fund forecast in April. Consumer-price gains in China and Malaysia eased to the slowest pace in almost two years in May, official data show. Malaysia’s ringgit, Thailand’s baht and China’s yuan will strengthen by 4.3 percent, 4.4 percent and 2.6 percent, respectively, versus the dollar by mid-2013, according to median estimates in Bloomberg surveys.
China’s gross domestic product will increase 8.2 percent this year, compared with 9.2 percent in 2011, according to another Bloomberg survey. HSBC Holdings Plc said in a research note yesterday that it expects authorities to spur Asia’s largest economy with more monetary easing in the coming months.
“Chinese policy makers are trying to boost the economy, and this will support the yuan in the long-term although the currency has been weak recently,” said Kim, who was promoted to head of fixed income at Samsung Asset in April.
Thailand’s consumer prices rose 2.53 percent in May from a year earlier following a 2.47 percent increase in April that was the smallest since 2009, official data show. Inflation in China and Malaysia slowed last month to 3 percent and 1.7 percent, respectively.
Kim forecast the yield on South Korean government three- year bonds will rise to 3.70 percent by year-end from 3.29 percent yesterday as the Bank of Korea will probably leave its benchmark interest rate at 3.25 percent for the rest of the year.
“South Korea’s economy may hit bottom in July or August, and will improve in the fourth quarter as global policy makers coordinate” their response to Europe’s debt crisis and the worldwide slowdown, he said.
Samsung Asset was “overweight” on South Korean corporate securities during most of the first half but has cut holdings to “neutral” as the yield premium over government debt began to widen this month, Kim said. Still, local companies are not under any credit risk and are globally competitive so any further widening of spreads may present buying opportunities, he said.
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