Financial firms such as Blackrock, UBS, HSBC, Pimco, and Fidelity have significantly reduced their funds' investments in high-yield Chinese real estate and construction firms.
The average weighting of China real estate bonds in Asian junk funds fell to 16 percent in June from nearly 28 percent at the end of last year, according to a «Bloomberg» (behind paywall) story, citing fund analysis firm Morningstar. As a result, developer bonds would have seen a 59 percent drop in investments.
Tighter lending standards and a slump in real estate sales are seen as reasons that would continue to weigh on the industry. The deepening liquidity crisis would take its toll on bonds.
Awaiting Party Conference
Blackrock's high-yield fund cut its real estate exposure by nearly half to about 15 percent of the portfolio in June from December, he said. Pimco reduced its stake to 12 percent from 22 percent. No figures are given for UBS' BS Asian HY fund for last June, but from the end of December to the end of March, its weighting fell to 24.3 percent from 31.4 percent.
«Fund managers are waiting for China’s National Party Congress in November 2022 for better clarity on the administration’s policy direction, including their stance on real estate,» says Patrick Ge, senior manager of research analysts at Morningstar.
Such uncertainties led to money outflows in Asian high-yield funds in the first and second quarters, the first time this has happened in consecutive quarters since 2013, according to Morningstar.
