Additional Tier 1 bonds issued by large Asia Pacific lenders extended gains as regulators’ assurances helped boost confidence and Goldman Sachs Group Inc. analysts highlighted opportunities in the notes.
(Bloomberg) — Additional Tier 1 bonds issued by large Asia Pacific lenders extended gains as regulators’ assurances helped boost confidence and Goldman Sachs Group Inc. analysts highlighted opportunities in the notes.
Of the 38 dollar-denominated perpetual bonds trading in the region as of 12:23 pm in Hong Kong, 31 advanced while the rest were quoted lower, according to data compiled by Bloomberg. Bank of Communications Co.’s perpetual note rose 1.4 cents to 95.5 cents, heading for its biggest gain since early 2020. Kookmin Bank’s US currency debt rose 0.8 cents to 94.1 cents.
The bonds designed to help banks meet regulatory capital requirements are rebounding from losses at the start of the week, when a state-led rescue plan for Credit Suisse Group AG wiped out its AT1 note holders. That spooked investors in the broader market, although assurances from authorities in the UK and the European helped reverse the selloff.
Some AT1 securities from the strongest banks in Asia Pacific offer attractive investment opportunities with their yields already exceeding their cost of equity, according to Goldman Sachs credit analysts Kenneth Ho and Chakki Ting.
“Investors should focus on the bigger, stronger banks, as they have lower risk of entering into stress events, and could be systemically important,” they wrote. “We see the recent weakness as an opportunity to add risk in their AT1 securities.”
Among the bonds dropping was Nanyang Commercial Bank Ltd.’s perpetual debt, which lost 0.4 cents to 94.5 cents on the dollar. Guangzhou Rural Commercial Bank Co.’s note also slipped 0.4 cents.
Jonathan Cornish, head of Asia-Pacific bank ratings at Fitch Ratings, pointed to a concentration of risks in sectors such as the smaller digital banks or lenders with exposure to natural resources.
(Adds Fitch comment in final paragraph, updates prices)
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