A firm owner suggested that the rampant delinquency in Chinese debt means greater opportunities for investors. He claimed that there are better business opportunities in China compared to the last 15 years that he has been analyzing China's non-performing loans. He also suggested that there would be bigger business opportunities in the coming months.
Founder of ShoreVest Partners and Guangzhou-based asset manager Benjamin Fanger suggested that delinquent Chinese debt could mean better business opportunities in China. Fanger claimed that the country's non-performing loans (NPLs) could get bigger in the coming months and that investors may acquire shares at a lower rate compared to previous stock values in the last 15 years.
He claimed that there exist 1.5 trillion USD market pitfalls in China at present. He claimed that if you are an investor that has little experience in the field, buying stocks during today's market temperature could be risky. However, the Fanger's team has purchased more than 15,000 Chinese NPLs since 2004. He then suggested that Chinese distressed debts have attracted global attention.
Fanger revealed that defaults have been soaring in China even before the pandemic caused financial trouble. He also claimed that President Xi Jinping's governmental restrictions on international investors affected the business activity of the market. He then suggested that the global market might experience an economic crisis that Chinese debt is a safer alternative for investors nowadays.
Credit-investing giant led by Howard Marks Oaktree Capital Group opened a wholly-owned unit in Beijing specifically created to purchase NPLs. The report claimed that the rewards for acquiring the debts could be fruitful for the acquisitor. Fanger's team then revealed that like Oaktree Capital Group, it perceived the situation as a profitable investment. They found that digital internal rates of return on all the company's NPL portfolios have been booming.
According to a ShoreVest offering document, the benchmark index for junk bonds in the US generated six percent before the pandemic disrupted the market. In Europe, the rates were yielding negatives on some corporate bonds. Despite the unfavorable yields, the report showed that global money managers since then have been desperate to find a window of opportunity from beaten-down Chinese debt.
The country had generated 1.5 trillion worth of NPLs and other stressed assets since 2019. It was also revealed that S&P Global Ratings estimates showed past-due loans having the ability to increase by 800 billion USD in value if the measures to contain the pandemic would be extended.
Although economic indicators hinted that China's economy could bounce back from the crisis swiftly, debt delinquencies may continue to rise. Hence, it was suggested that the biggest credit booms in China have been perceived as record highs and that the government may tap on the brakes. However, it was suggested that buyers in the distressed investing market from the West may have little use in China.
