U.S. dollar bonds sold by Chinese companies have rebounded sharply on bets by fund managers that a plunge in prices amid market chaos and a scramble for dollars was overdone as China’s economy begins to pick up and stimulus packages kick in.

An index tracking high-yield dollar bonds sold by Chinese companies has rallied 6.9 percent from three-and-a-half-year lows reached last week following a 17 percent tumble.

Buying has been most obvious among Chinese property developers’ debt, where some bonds slumped to less than 60 percent of their face value, from trading above 80 percent in early March.

Bond investors expected to be paid back 100 percent of face value, so prices below that reflect repayment doubts.

“We have seen some good quality credit in property dropping 30, 40 points, to the kind of level in default territory — and we just don’t see that happening,” said Sheldon Chan, Hong Kong-based associate portfolio manager at T Rowe Price, whose fund has been bargain-hunting.

Chinese borrowers have accounted for just over half of all dollar-denominated bonds sold by companies in the region over the past five years, according to data from Dealogic, and last year totalled 80 percent of all junk-rated, or high-yield, issuance.

“Because of the liquidity stress, quite a few quality names came onto the market at very low valuations ... They’re worth buying, and holding,” said Shen Bowen, a Shanghai-based fund manager at Fullgoal Fund Management Co.

She said some quality Chinese developers, and State-owned companies (SOEs) were “slaughtered by mistake” amid the rush for the exits even though the coronavirus situation in China is improving.

(SD-Agencies)