DMSA study: EVERGRANDE - 10 Billion US-Dollar in losses for Asia-Funds

DMSA Deutsche Markt Screening Agentur GmbH

2021/11/18 11:10

PR93130 

 

BERLIN, Nov. 17, 2021 /PRNewswire=KYODO JBN/ --

 

The Evergrande default and the China real estate crisis are currently causing

around 10 billion US dollars in losses at the ten largest pension and

investment funds specializing in Asia, with the largest Evergrande bond

exposure of around 1.2 billion US dollars. Of these, US$7 billion have already

been incurred in real terms and a further US$2 billion will be realized when

insolvency is filed. A further US$158 billion in losses on Evergrande from CDS

investments by international investors is expected.

 

A recent DMSA study analyzing the top ten Asia-focused pension and mutual funds

with the largest exposure to Evergrande bonds shows:

 

Evergrande and general China exposure has led to losses of up to 21 percent

this year in all 10 funds studied; across all 10 funds combined, losses total

$7 billion. Current Evergrande bond prices are about a quarter per dollar

(about 25 percent of 100 nominal) and, based on Fitch redemption rates, will

fall to 5 percent per $100 upon insolvency. Therefore, a further correction of

6 percent or $2 billion is expected.

 

"If Evergrande will be bankrupt, the above funds would lose $9 billion in total

year-to-date. This does not take into account real estate companies that are

still well valued and which could also be on the verge of insolvency. The

funds' losses then exceed the $10 billion mark," explains DMSA senior analyst

Dr. Marco Metzler. It also shows that with only $1.2 billion of reported

official Evergrande bond exposure, the losses are significantly higher than the

nominal bond exposure by a factor of 10. "The difference can only be explained

by possible additional investments in other bonds from Chinese real estate

developers and credit default swaps (CDS)," analyzes Dr. Metzler. According to

a research report by investment bank Goldman Sachs, the market's CDS exposure

to Evergrande is said to be around $158 billion. "This shows that extent of the

spill-over effects of the Evergrande bankruptcy. In addition to the $23.7

billion in bonds, another $158 billion would then be lost," Dr. Metzler

summarized.

 

Valued at $55 trillion, the Chinese real estate market is twice the size of

that in the United States. It generates 29 percent of China's gross domestic

product, compared with 10 to 20 percent in other nations, and has been called

the most important sector of the global economy. But with the mountain of debt

from real estate developers like Evergrande and funds overweight in real estate

bonds, many are now experiencing dramatic losses.

 

According to the information available, the Asian High Yield funds of Fidelity

and UBS are the ones with the highest Evergrande exposure.

 

Name

Participation

Issued pcs. in %

Data delivery Fantasia

 

FIDELITY - ASIAN HIGH YIELD

215.056.305

0,91

30.06.2021

-

30.09.2021

 

UBS - Asian High Yield USD

171.924.000

0,73

30.09.2021

53.050.000

30.09.2021

 

Ashmore SICAV - Emerging Markets TR

166.656.000

0,70

30.09.2021

28.208.000

30.09.2021

 

Ashmore SICAV - Emerging Markets LC

140.016.000

0,50

30.09.2021

47.841.000

30.09.2021

 

iShares USD Asia High Yield Bond ETF

134.439.000

0,50

08.11.2021

2.300.000

08.11.2021

 

PIMCO Asia High Yield Bond Fund

111.300.000

0,47

30.06.2021

17.400.000

30.06.2021

 

BlackRock - Asian Tiger Bond

88.589.000

0,37

31.05.2021

38.535.000

31.05.2021

 

Fidelity - Global Multi Asset Income

76.007.640

0,32

31.08.2021

-

30.09.2021

 

Eastspring Investments - Asian Bond

58.950.000

0,25

30.09.2021

48.450.000

30.09.2021

 

AB FCP I - Global High Yield Portfolio

28.460.000

0,12

30.09.2021

-

30.09.2021

 

Participation

1.191.397.945

 

Fantasia Participation

235.784.000

 

Participation on Evergrande and Fantasia Bonds

 

Looking at the average ratings in the affected funds, the Fidelity Asian High

Yield Fund has a weight of 34.2 percent invested in real estate with an average

rating of BB. This has lost 17.3 percent in value this year. The UBS Asian High

Yield Fund, with an average rating of BB-, holds 45.7 percent in real estate

bonds. This has lost 20.8 percent in value this year.

 

"The top ten funds hold $1.2 billion in Evergrande bonds," said Dr. Marco

Metzler. "However, there is another $236 million exposure to other real estate

companies such as Fantasia, and it is quite clear that the funds under

consideration are overweight the real estate sector. They hold up to 45 percent

in real estate bonds, which may now be their undoing."

 

Name

Losses In % 2021

Participation Evergrande Bonds

AuM in Bio. $

Losses in Bio. $

 

FIDELITY FUNDS - ASIAN HIGH YIELD FUND

-17,27%

215.056.305

3,90

-0.79

 

UBS Lux Bond SICAV - Asian High Yield

-20,83%

171.924.000

2,97

-0.75

 

Ashmore SICAV - Emerging Markets TR

-11,24%

166.656.000

21,35

-2.67

 

Ashmore SICAV - Emerging Markets LC

-11,18%

140.016.000

3,33

-0.41

 

IShares USD Asia High Yield Bond Index

-15,50%

134.439.000

1,74

-0.31

 

PIMCO Asia High Yield Bond Fund

-12,83%

111.300.000

1,73

-0.25

 

BlackRock Global Funds- Asian Tiger Bond

-8,27%

88.589.000

5,25

-0.47

 

Fidelity Funds - Global Multi Asset Income

-3,93%

76.007.640

9,30

-0.38

 

Eastspring Investments - Asian Bond

-8,25%

58.950.000

3,60

-0.32

 

AB FCP I - Global High Yield Portfolio

-2,36%

28.460.000

27,05

-0.65

 

Participation Evergrande Bonds

1.191.397.945

 

Losses in Bio. $

-7.01

 

Losses of funds with largest Evergrande bond exposure

 

The losses incurred have already called for personnel consequences. The senior

investment manager of UBS Asian High Yield has reportedly left the firm after

suffering significant losses since the start of the year and holding

substantial holdings in the Chinese real estate sector, including bonds issued

by Evergrande. Singapore-based Ross Dilkes has left UBS Asset Management after

starting there 16 years ago, according to a "Bloomberg" report. Dilkes is the

senior manager of the Asian High Yield fund, which was launched about nine

years ago.

 

Treasury Secretary and ex-FED President Janet Yellen fears consequences for the

global economy. She recently warned that Evergrande's and other Chinese

difficulties in repaying billions of dollars in loans could have repercussions

for the global economy.

 

Fears that its collapse could drag down Chinese banks and shake the country's

huge real estate market have roiled global financial markets and now Americans.

 

The Federal Reserve warned of direct risks to the U.S. in its latest Financial

Stability Report. Financial tensions in China could weigh on global financial

markets by worsening risk sentiment, pose risks to global economic growth, and

affect the United States.

 

Please find more information and the research report at www.dmsa-agentur.de.

 

About DMSA Deutsche Markt Screening Agentur GmbH:

 

DMSA Deutsche Markt Screening Agentur GmbH, is an independent data service that

collects and evaluates market-relevant information on companies, products and

services. DMSA sees itself as an advocate for consumers, private customers and

intelligent investors. The claim: to always look at companies and providers,

products and services through the eyes of the customers. The customers are the

focus of DMSA's work. For them, important and decision-relevant information is

bundled and presented as market screenings. The aim is to create more

transparency for consumers when selecting products, investments and services.

 

Press contact:

Inga Oldewurtel

Press Officer

oldewurtel@prio-pr.de

+49 176 62 26 18 97

 

Responsible for the content:

Michael Ewy

Managing Director

DMSA Deutsche Markt Screening Agentur GmbH

Wichertstraße 13

10439 Berlin

Germany

 

Source: DMSA Deutsche Markt Screening Agentur GmbH

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