Asia Fixed Income Analyst

Derek Silva

Credit

Rising aluminum prices, a fresh equity top-up fundraising, a strong position as one of the world’s biggest aluminium producers, and still yielding over 10% for short-dated paper. What’s not to love about China Hongqiao’s bonds?
What’s not so lovely about Hongqiao (bond ticker: HONGQI) is the bumpy ride that bond investors have suffered from several significant 5-10 point drops over the years. That’s not unusual for equity investors, but it is for bonds, particularly when they’re short-dated and issued by a global industrial powerhouse. The issuer has endured negative headlines from regulators, environmental controversies and short-selling research firms.
The closest direct peer is Chalco but it is IG-rated and lower yielding due to State ownership. Another industrial comparable would be Yingde Gases, but its bonds are trading with a low yield-to-call and no upside left due to much stronger fundamentals. One would expect a company with Hongqiao’s scale, vertical integration and top-quartile position in the cost curve to be IG rated by now, but these factors have yet to translate to consistently strong free cash flow and deleveraging.
So, while Asia credit is gaining more positive attention now and the search for yield is stronger than ever, a 10% yield should be very tempting for both the 2022 and 2023 maturities. But when it comes to Hongqiao’s bonds, it’s always better to buy on the dip, because there’s often a dip with this issuer.

Rising aluminum prices, a fresh equity top-up fundraising, a strong position as one of the world’s biggest aluminium producers, and still yielding over 10% for short-dated paper. What’s not to love about China Hongqiao’s bonds?
What’s not so lovely about Hongqiao (bond ticker: HONGQI) is the bumpy ride that bond investors have suffered from several significant 5-10 point drops over the years. That’s not unusual for equity investors, but it is for bonds, particularly when they’re short-dated and issued by a global industrial powerhouse. The issuer has endured negative headlines from regulators, environmental controversies and short-selling research firms.
The closest direct peer is Chalco but it is IG-rated and lower yielding due to State ownership. Another industrial comparable would be Yingde Gases, but its bonds are trading with a low yield-to-call and no upside left due to much stronger fundamentals. One would expect a company with Hongqiao’s scale, vertical integration and top-quartile position in the cost curve to be IG rated by now, but these factors have yet to translate to consistently strong free cash flow and deleveraging.
So, while Asia credit is gaining more positive attention now and the search for yield is stronger than ever, a 10% yield should be very tempting for both the 2022 and 2023 maturities. But when it comes to Hongqiao’s bonds, it’s always better to buy on the dip, because there’s often a dip with this issuer.

China Hongqiao: A No-Brainer at 10% Yield? Not if You Can Wait for the Dip

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

In this month’s “In-Focus” section, we provide an update on the Macau gaming sector, including our market outlook, concession renewals and a peer comparison of the four companies under our coverage. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s “In-Focus” section, we provide an update on the Macau gaming sector, including our market outlook, concession renewals and a peer comparison of the four companies under our coverage.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - Macau Gaming Update - Lucror Analytics

The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index.

  The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Book - November 2020 - Lucror Analytics

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/china-hongqiao-group-ltd" target="_blank" data-smartkarma-citation="entities:1909:1" rel="noopener">China Hongqiao (1378 HK)</a> is looking to raise US$200m from its top-up placement to fund the development of new production lines.In this insight, we will discuss deal dynamics and run the deal through our ECM framework.We have covered the 2018 placement in:<ul><li>
<a href="https://www.smartkarma.com/insights/china-hongqiao-placement-not-a-game-changer" target="_blank" data-smartkarma-citation="insights:16821" rel="noopener">China Hongqiao Placement - Not a Game Changer</a> </li></ul>

China Hongqiao (1378 HK) is looking to raise US$200m from its top-up placement to fund the development of new production lines.In this insight, we will discuss deal dynamics and run the deal through our ECM framework.We have covered the 2018 placement in:
China Hongqiao Placement - Not a Game Changer 

China Hongqiao Placement - Deep Discount for a Big Deal

In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our first report, the number of such issuers has increased notably. At the same time, with the Lucror Chinese Industrial index having run since 1 January 2018, we can now better compare the unrated issuers' performance relative to peers. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our first report, the number of such issuers has increased notably. At the same time, with the Lucror Chinese Industrial index having run since 1 January 2018, we can now better compare the unrated issuers' performance relative to peers.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - Returns And Volatility For Unrated Chinese Issuers (2020) - Lucror Analytics

China

China Hongqiao Group Ltd. manufactures aluminum products. The Company's aluminum products consist of molten aluminum alloy, aluminum alloy ingots and aluminum busbars.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

China Hongqiao (1378 HK)

China Hongqiao: A No-Brainer at 10% Yield? Not if You Can Wait for the Dip

A 10% yield should be tempting for short-dated bonds from an industry giant. But when it comes to Hongqiao’s bonds, it’s always better to buy on...

Derek Silva

Asia HY Monthly - Macau Gaming Update - Lucror Analytics

In this month’s “In-Focus” section, we provide an update on the Macau gaming sector, including our market outlook, concession renewals and a peer...

Lucror Analytics

Asia HY Trade Book - November 2020 - Lucror Analytics

The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also...

Lucror Analytics

China Hongqiao Placement - Deep Discount for a Big Deal

China Hongqiao is looking to raise US$200m from its top-up placement to fund the development of new production lines for secondary aluminum and...

Zhen Zhou, Toh

Asia HY Monthly - Returns And Volatility For Unrated Chinese Issuers (2020) - Lucror Analytics

In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our...

Lucror Analytics

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)