As the global markets are spooked by the latest development over Chinese conglomerate Evergrande Group’s woes due to its debt crisis, experts believe that the situation will not be a widespread issue.
Principal Global Investors chief investment officer Todd Jablonski said it is no doubt that the incident caught investors by surprise, but the government would play its role in stabilising the market.
“No doubt it might have caused uneasiness as China is the second largest economy. This has led to investors being taken by surprise as China is at a pace of regulatory reform. However, we believe it will be contained,” he said in an interview with Bernama.
Evergrande, which is one of China’s largest property developers in sales, is a test to Beijing as analysts were cautious it could bring back China to the moment of Lehman Brothers, an investment company that faces bankruptcy in 2008.
The property sector in China contributes 30 per cent to the country’s gross domestic product.
Meanwhile, Principal Asset Management Singapore chief executive officer and chief investment officer Christopher Leow said while foreign investors might be cautious at the moment, especially those who invest in higher bonds, it would not leave a permanent impact on China’s equity market.
“This is because in 2020 there has been an establishment of a “Three Red Lines Policy” which was monitored by the government. The lines were debt over cash, debt over assets, and debt over equity. Hence, we believe it will be resolved,” he said.
Despite the development, Todd said the global asset outlook remains on the uptrend, driven by global recovery from COVID-19’s impact, as well as credit exposure.
“Year-to-date, we have seen contraction due to the pandemic. However, we can see from the trend that we have almost recovered. China, despite its earlier contraction, can surely rebound. Emerging markets meanwhile, will move in line with China’s recovery,” he said.
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