"We are tiptoeing in... we really love China property, although we're buying into those higher yielding bonds slowly," Mike Kelly, global head of multi-asset at the $140 billion asset manager told Reuters.
"We are looking at two-year paper in dollar offshore markets, a rung below state-owned enterprises."
Regulatory curbs on borrowing by big real estate developers have driven China's property sector into crisis, highlighted by China Evergrande Group. Once China's top-selling developer, it is now the world's most indebted property firm with liabilities of around $300 billion.
But of late, Beijing has acted to restore stability and introduced a raft of measures, including making it easier for state-backed developers to buy up distressed assets of indebted private firms and for developers to access funds from sales still held in escrow accounts.
The sector's stocks and bonds further extended gains on Thursday after Beijing unexpectedly lowered borrowing costs on its medium-term loans for the first time since April 2020.
Kelly said authorities' measures to stabilise the market promised "extraordinary" returns. He declined to name companies.
Having started to buy at end of December, he said he was still "in the accumulation stage", picking up securities at 75-85 cents in the dollar, with coupons in the 8% area.
While the bonds were junk-rated, they were a notch below the debt of state-run Chinese companies which traded at much higher valuations.
"It's just too big to fail. (President Xi Jinping) is smart enough to be a gradualist and it's gone too far too fast," Kelly added.
(Reporting by Sujata Rao and Dhara Ranasinghe, editing by Karin Strohecker)
