SINGAPORE – BlackRock Inc and Royal Bank of Canada’s BlueBay Asset Management are among the asset managers exposed to embattled developer China Evergrande Group, while TCW and HSBC funds have closed positions, said researcher Morningstar.
In an analysis published on Friday, Morningstar said UBS Group AG and London-based Ashmore Group PLC funds retained significant holdings in Evergrande debt, based on data current as at end-August.
Funds run by Fidelity and SinoPac held sizeable investments, it said.
BlueBay told Reuters that its holding is “very limited”, and that it has been reducing it since the end of last month.
None of the other asset managers provided comment.
Evergrande owes US$305 billion (RM1.27 trillion) and has run short of cash. Some investors are worried that a corporate collapse could pose systemic risks to China’s financial system and reverberate around the world.
Last week, Evergrande failed to pay interest on a US$2 billion dollar bond maturing in March. It will default if it makes no payment within a 30-day grace period.
HSBC’s asset management division and fund manager TCW exited Evergrande positions in September and August, said Morningstar.
HSBC declined to comment, and TCW had no immediate response.
Credit Suisse Group AG, not mentioned by Morningstar, sold its entire exposure to Evergrande debt last year, reported the Financial Times on Friday.
Fellow Swiss bank UBS has Evergrande debt exposure totalling about US$283 million across multiple portfolios, said Morningstar.
Ashmore’s runs to US$146 million.
Both declined to comment.
Morningstar earlier noted that BlackRock’s exposure recently increased. In its Friday analysis, it said BlueBay has “gradually started adding”.
“The investment team proactively reduced exposure to the company earlier this year,” said BlueBay in a statement.
Morningstar did not give a dollar total for the BlueBay exposure, though the researcher listed two BlueBay funds in its top exposure lists, with exposure of about US$8 million in July, along with an index-tracking fund managed by BlackRock that it said has about US$1.5 million in exposure this month.
BlackRock declined to comment.
Evergrande’s dollar bonds have been tumbling since May, when the group was late in paying suppliers. A US$1 billion dollar bond with a coupon payment due next week last traded at a distressed level of 27.5 cents on the dollar.
Of the other fund managers mentioned by Morningstar, only T Rowe Price Group Inc – which closed its Evergrande position last year – had immediate comment when contacted by Reuters.
“A period of elevated high-yield default rates may lead to dollar market access being shut for some weaker issuers,” said Sheldon Chan, portfolio manager of T. Rowe Price’s Asia credit bond strategy, in an email response.
“This may keep volatility elevated… and present attractive entry points to add exposure to the sector.” –Reuters, September 28, 2021
