Investors turning bullish on China are buying record amounts of structured notes tied to the yuan as the country recovers from a two-year economic slowdown.
Individual investors in the U.S. bought $79.9 million of notes since December that rise and fall in value based on swings in the offshore Chinese renminbi, according to data compiled by Bloomberg. The nine notes created by HSBC Holdings Plc (HSBA) use the highest leverage for such securities since Bloomberg began compiling the data in January 2010 to generate yields as much as five times more than the yuan’s appreciation.
The Communist nation’s economic growth accelerated last quarter for the first time since 2010, fueling speculation that the government would allow the currency to rise at a faster pace. The median forecast of analysts surveyed by Bloomberg was for the yuan to gain 2 percent by the end of 2013, following a 1 percent rise last year, the slowest since 2009.
“In the last six months, we have seen increased demand from high-net-worth investors looking for ways to access the growing Chinese market,” Todd Fruhbeis, managing director and head of structured-product sales for the Americas at HSBC in New York, wrote in an e-mail. “We expect this trend will continue given China’s continued growth prospects.”