Dongbu Asset Management Co., which oversees 6.8 trillion won ($5.8 billion), favors infrastructure, information technology and alternative energy stocks in Asia Pacific where they will gain most from development policies.
“They’ll provide outstanding opportunities in the longer-term as company values and earnings grow,” said Son Jang Soo, head of Dongbu’s global investment division in an interview at his Seoul office yesterday. “I see opportunities in high-yield bonds on attractive spreads,” he added.
The region offers more stable returns than commodity- dependent countries such as Brazil and Russia, while global economic prospects are “mixed,” Son said.
India plans to double spending on roads, ports and power plants to $1 trillion in the five years to 2017. China may spend about $738 billion in the next decade developing cleaner sources of energy, according to the National Energy Administration’s planning and development department.
Global high-yield bonds, rated below Baa3 by Moody’s Investors Service, returned 8.9 percent so far this year, according to a Bank of America Merrill Lynch index. That compares with a 1.9 percent loss for the Standard & Poor’s 500 stock index. The MSCI EM Asia Index is up 1.6 percent this year.
A shift to the “new normal” means low interest rates and inflation, which makes bonds relatively appealing for now, Son said. Pacific Investment Management Co., or Pimco, termed the new normal to describe a shift toward slower economic growth caused by deleveraging and regulation in developed nations.
Dongbu currently invests 210 billion won in Chinese stocks and 23 billion won in Asia-Pacific stocks, according to Son.
Dongbu Asset is a unit of Dongbu Group, along with Dongbu Insurance Co., South Korea’s second largest non-life insurer, and Dongbu Steel Co., a maker of cold-rolled steel sheets.