Big-name investors are navigating the China Evergrande crisis right now by turning to these 8 experts from firms like Muddy Waters and BCA Research

Updated: October 14th, 2021 05:40 PM IST

Big-name investors are navigating the China Evergrande crisis right now by turning to these 8 experts from firms like Muddy Waters and BCA Research

Big-name investors are navigating the China Evergrande crisis right now by turning to these 8 experts from firms like Muddy Waters and BCA Research

It is perhaps no coincidence that just four years after his call to bring back housing market stability in China, the countrys second-largest real estate developer is teetering on the brink of a collapse. 

Once a powerful conglomerate, China Evergrande Group now has more than $300 billion in liabilities. The debt-laden company reportedly owes money to 28 banks and over 121 non-banking institutions globally, according to Reuters, citing a leaked Evergrande letter. 

Just weeks ago, the systemic risk of a looming Evergrande default triggered fears of global contagion, causing sudden sell-offs in both the traditional and crypto markets. While markets have since bounced back from fear-driven declines, the Evergrande saga is far from over.

The real estate developer still has over 800 unfinished projects spread across more than 200 cities in China. Over the years, Evergrande has also reached its tentacles into bottled water, electric vehicles, professional soccer, and wealth-management businesses. This means that the wealth of millions of Chinese retail investors is tied closely to the rise and fall of Evergrande. 

As of early October, Evergrande had missed at least five bond interest payment deadlines. Commiserating in Evergrandes debt woes, Chinese luxury real estate developer Fantasia Holdings Group also failed to make a US dollar bond payment of $206 million that was due on October 4. Another developer, Modern Land, asked to delay a $250 million bond payment due later this month.

Bearish investors called the Evergrande crisis Chinas Lehman moment, but investment banks including Citi and Barclays have dismissed that possibility. 

As investors try to wrap their heads around the repercussions of what could soon become Chinas largest debt restructuring ever, Insider caught up with eight China experts including hedge-fund managers and research analysts to figure out how they are advising investors to avoid risks and find opportunities amid the chaos. 

Matt Gertken is a geopolitical strategist at BCA Research. BCA Research

It is entirely possible that the Chinese governments reining in of excessive property debt and speculation triggers a nationwide economic and financial crisis, Gertken said. 

In his view, as developers scramble for cash, banks cut back on lending, and local governments struggle for revenues, policymakers are forced to guide the restructuring of Evergrandes debt and ring-fence the troubled developer to prevent financial contagion. 

"Even then, the reversion to autocracy and large financial imbalances make policy overtightening a major risk for the global economy, now and in the coming years," he added. 

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