China Debt Risks Go Global Amid Record Junk Sales Abroad


“Today’s market valuations are tight and investors are focusing on yields without taking into account credit risks,” said Raja Mukherji, Hong Kong-based head of Asian credit research at Pacific Investment Management Co. “That’s where I see a lot of risk, where investors are not differentiating on credit quality on a risk-adjusted basis.”

To be sure, a bigger chunk of the risk-taking in the market for Chinese dollar bonds is now coming from investors from China itself. The increasing participation by Chinese buyers, who tend to hold their purchases for the long term, could help limit losses for foreign money managers if the market turns. The country’s banks have been buying 45 percent of new Chinese bond offerings, and are also active in the Chinese local government financing vehicle and investment-grade corporate sectors, according to a Bank of America report.

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