Evergrande, the 10 funds at risk of collapse



25/08/2023 - 18:23

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The UK-based Ashmore Group manages four of the 10 Luxembourg- and Irish - domiciled funds that show the largest exposure to Evergrande.

Evergrande, the 10 funds at risk of collapse

The ongoing crisis at Chinese real estate giant Evergrande is straining global financial markets and is likely to have a significant impact on investors.

According to Morningstar data, four of the 10 Luxembourg and Irish domiciled funds that show the greatest exposure to Evergrande are managed by the UK group Ashmore. However, it is essential to note that European investment funds’ exposure to Evergrande is modest when compared to the $20 billion that was invested by global investors prior to the first coupon default in 2021.

Below is the ranking of the funds exposed in Evergrande, sorted by weight in the portfolio of the stock in crisis:
1) Ashmore SICAV Emerging Markets Short Duration: 1.09%
2) Avalorn - Clarion Global Emerging Markets Bond: 0.94%
3) Aviva Investors Investment Solutions - Fixed Maturity Plan Series I: 0.92%
4) First Sentier Asia Strategic Bond: 0.33%
5) Ashmore SICAV Emerging High Yield Corporate Debt: 0.27%
6) Goldman Sachs Asia High Yield (Former NN): 0.21%
7) Ashmore SICAV Emerging Markets Corporate Debt: 0.20%
8) Ashmore SICAV Emerging Markets Local Currency Bond (BROAD): 0.17%
9) BNP Paribas Funds Emerging Bond: 0.16%
10) BlackRock Strategic Funds - Emerging Markets Short Duration Bond: 0.15%

The situation of Evergrande was further complicated by the filing of the bankruptcy protection application in the United States on Aug. 17, two years after an initial default in 2021 that triggered a housing crisis in China. Furthermore, the company has reported a loss of more than 74 billion euros in the last two years, indicating deep financial instability.

It’s not just Evergrande that suffers the negative impact: another well-known real estate development company, Country Garden Holdings, had difficulty paying coupons at the beginning of the month, fueling fears of a possible contagion effect that could involve different areas of the Chinese economy.

To address financial instability and restore investor confidence, Chinese authorities recently announced new measures to support China’s stock market. These measures were implemented in response to sharp declines in equity and bond markets, reflecting investors’ growing pessimism about the Chinese economy.

In conclusion, the Evergrande crisis represents a critical challenge for global financial markets, with potential impacts on several sectors. The funds’ exposure to this crisis highlights the importance of diversification and risk management) in investor portfolios. While the Chinese authorities try to contain the negative consequences, investors’ eyes remain closely focused on the following developments, aware that Evergrande’s dynamics could have significant impacts on the global economy.

Original article published on Money.it Italy 2023-08-28 08:15:00. Original title: Evergrande, i 10 fondi obbligazionari a rischio crollo

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