Pacific Investment Management Co. is favoring bonds of companies linked to the U.S. automobile industry and Asian gaming market amid subdued global economic growth.
Significant pent-up demand for cars in the U.S. and infrastructure investments made by the Chinese government to improve access to Macau, the only place in China where casino gambling is legal, make those industries attractive, according to Mark Kiesel, Pimco’s global head of corporate bonds. The world’s largest bond fund manager targets companies whose credit grades may be upgraded by ratings companies, he said.
“In the U.S., we continue to favor a group of auto and auto finance companies with improving fundamentals,” Kiesel wrote in a report on the Newport Beach, California-based company’s website. “Macau offers investors an attractive way to invest in the growth of the Chinese consumer.”
Signs of a modest recovery in Europe mean a few auto and auto-parts companies “are well positioned to benefit from an improvement in profitability and free cash flow as the European auto cycle turns,” Kiesel wrote.
Kiesel also sees potential gains in corporate bonds in the U.S. energy, chemical and housing industries.