BlueBay a buyer of Evergrande debt; Ashmore, UBS exposed – Morningstar

September 27, 2021

SINGAPORE (Reuters) -Royal Bank of Canada’s BlueBay Asset Management has joined BlackRock in accumulating credit exposure to ailing developer China Evergrande in recent months, according to Morningstar, while HSBC and TCW funds have closed positions.

Morningstar’s analysis, published on Sept. 24, also showed that UBS and funds at London-based Ashmore Group retained significant holdings in Evergrande debt, based on data current at the end of August. Funds run by Fidelity and SinoPac held sizeable investments too, Morningstar’s research showed.

Evergrande owes $305 billion and has run short of cash. Some investors worry a collapse could pose systemic risks to China’s financial system and reverberate around the world.

Last week Evergrande failed to pay interest on a $2 billion dollar bond maturing in March next year. It will default if no payment is made within a 30-day grace period.

HSBC’s asset management division and fund manager TCW exited Evergrande positions in September and August, Morningstar, a research firm, said. HSBC declined to comment and TCW had no immediate response when contacted by Reuters.

Credit Suisse, not mentioned by Morningstar, sold down its entire exposure to Evergrande debt last year, the Financial Times reported on Friday.

Fellow Swiss bank UBS has Evergrande debt exposure totalling about $283 million across multiple portfolios, Morningstar said in its report. Ashmore’s runs to $146 million. UBS and Ashmore declined to comment.

Morningstar had earlier noted BlackRock’s exposure had recently increased but said in its Friday note that BlueBay had also been gradually adding exposure.

It did not give dollar totals for their exposures, though two BlueBay funds with exposure of about $8 million and one index-tracking fund managed by BlackRock, with about $1.5 million in exposure, were included in top exposure lists.

Blackrock and BlueBay declined to comment.

Evergrande’s dollar bonds have been tumbling since May when the group was late in paying suppliers. A $1 billion dollar bond with a coupon payment due next week last traded at the distressed level of 27.5 cents on the dollar.

Of the other fund managers mentioned by Morningstar, only T. Rowe Price – 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,” Sheldon Chan, portfolio manager of T. Rowe Price’s Asia credit bond strategy, said in an emailed response.

“This may keep volatility elevated … and present attractive entry points to add exposure to the sector.”

(Reporting by Tom Westbrook; Editing by Kirsten Donovan and Susan Fenton)

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