Asian Consumer Spending Spurs Retailers’ Bonds to Best Returns

Dec. 31 (Bloomberg) -- Parkson Retail Group Ltd. and Shinsegae Co. led Asian retailers whose dollar bonds delivered the best returns of any industry group in the region this year as consumer spending rose.

Asia consumer company bonds returned 56 percent on average, according to an index compiled by JPMorgan Chase & Co., beating those of financial companies at 36 percent, industrial companies at 32 percent and utilities at 22 percent. The extra yield spread investors demand to own the retailers’ dollar notes instead of U.S. Treasuries narrowed 19.02 percentage points to 4.76 percentage points since Jan. 2, JPMorgan data show.

“One of the big stories of 2009 has been the rebalancing of growth towards domestic demand in Asia,” Sebastien Barbe, head of emerging-market research for Calyon, said in a phone interview from Hong Kong. “Consumer demand, particularly in India, China and Indonesia, has been more resilient than people expected at the beginning of the year. That’s contributed to the narrowing of spreads.”

Chinese retail sales may rise by more than 15 percent to exceed 12.5 trillion yuan ($1.83 trillion) this year, Trade Minister Chen Deming said on Dec. 24, as government stimulus measures and record bank lending spurred the fastest-growing major economy. Sales at South Korea’s major department stores rose for a ninth month in November, the Ministry of Knowledge Economy said Dec. 18. Spending at the three biggest chains climbed 6.4 percent from a year earlier.

Credit Recovery

PT Matahari Putra Prima, Indonesia’s second-biggest retailer by market value, and Shinsegae, which runs Korea’s biggest discount-store chain, sold dollar bonds this year as credit markets recovered from the worst global recession since the Great Depression and the 2008 collapse of Lehman Brothers Holdings Inc.

Shinsegae, based in Seoul, sold $200 million of three-year, 6.125 percent bonds in June 2008 that yielded 3 percent yesterday, according to Royal Bank of Scotland Group Plc. They were yielding 10.6 percent on Jan. 1, the Edinburgh-based lender’s prices show.

Beijing-based Parkson Retail, which owns department stores in 29 cities in China according to its Web site, sold $125 million of 7.125 percent notes due 2012 in May 2007 that yielded 6.099 percent yesterday, according to Nomura Holdings Inc. The notes yielded 20.8 percent on Jan. 9, Nomura prices show.

Rare Bonds

“If Parkson came out with another bond people would snap it up because retail dollar bonds are rare in Asia and there’s always a lot of interest from investors in this sector,” said Anthony Shum, a Hong Kong-based director of Asia-Pacific debt capital markets for Barclays Capital. “Parkson, with its stores in China, has been influenced by the government stimulus and Chinese New Year should also have a positive effect.”

Asian retail dollar bonds last outperformed their peers in 2006, when they delivered a 13 percent return compared with 6 percent for financials, utilities and industrials, JPMorgan data show. The notes handed investors a loss of 29 percent last year, almost double the 15 percent loss on bonds of the region’s financial companies.

“Employment in many east Asian economies has shown surprising resilience while real estate prices in a number of key markets have held up well, or even risen, despite large declines in the U.S. and parts of Europe,” said Tan Kim Eng, a Singapore-based credit analyst at Standard & Poor’s. “These factors have supported consumption, and with an expected recovery next year they must have led many to expect companies in the consumer sector will do well.”