Vietnam’s dollar bonds are leading gains in Asia this year, according to HSBC Holdings Plc.
The notes handed investors a 10 percent return, HSBC Holdings Plc indexes show, as consumer price increases slowed to a 12-month low and the trade deficit narrowed.
India’s bonds advanced 7.1 percent and China’s 4.9 percent, the next best performances among the region’s 11 biggest economies excluding Japan.
Vietnam’s bonds are also in demand this year as higher-yielding securities will probably be least affected by rising treasury yields as the US economy improves, said Sergey Dergachev, a senior portfolio manager in Frankfurt at Union Investment.
Aberdeen Asset Management Plc (ADN) and Union Investment Group, which oversee the equivalent of US$526 billion in assets, say they boosted holdings of Vietnam’s global debt in the past year.
“Vietnam is a good hedge for me against a possible rise in US Treasury rates,” Sergey Dergachev said. “Vietnam historically, and also as a high-yield credit, is less susceptible to movements of US Treasury yields than Philippine and Indonesian debt.”
Vietnam’s 6.75 percent dollar bonds due January 2020 yield 326 basis points, or 3.26 percentage points, more than similar-maturity US Treasuries, while the yield premiums for the Philippines’ 6.5 percent debt due January 2020 and Indonesia’s 5.875 percent notes due March 2020 are at 146 basis points and 170 basis points, respectively, according to data compiled by Bloomberg.
Vietnam’s trade gap narrowed as slower lending growth curbed demand for imports. The trade deficit was US$150 million in March, down from $279 million in February, preliminary figures from the statistics office showed on March 28.
Slower inflation limited domestic demand for foreign currency, easing pressure for its currency (VND) to devalue and giving the central bank room to bolster its foreign-exchange reserves.