“We’ve already seen the downbeat stock market impacted by uncertainties, including the further interest rate increase and the US-China trade war,” said Douglas Woo Chun-kuen, chairman and managing director of Hong Kong property developer Wheelock and Co. “They will also add pressure onto the property market.”
Interest-Rate Hedging Strategies
Hong Kong investors seeking refuge from rising rates can look at fixed-income ETFs in the United States like the InvesProShares High Yield—Interest Rate Hdgd (BATS: HYHG), which incorporates short-term rate hedging strategies. HYHG tracks the performance of the Citi High Yield (Treasury Rate-Hedged) Index and allocates 80% of its total assets in high-yield bonds and short positions in Treasury Securities in order hedge against rising rates.
Because HYHG invests in high-yield bonds, there is credit risk associated with the higher yield since the fund invests in corporate issues that are less than investment-grade. By targeting a duration of zero, HYHG offers less interest rate sensitivity versus its short-term bond peers.
For more trends in fixed income, visit the Fixed Income Channel.