BlueBay, Blackrock, Ashmore and UBS exposed to Evergrande, says Morningstar

Evergrande's dollar bonds have been tumbling since May when the group was late in paying suppliers.
Evergrande's dollar bonds have been tumbling since May when the group was late in paying suppliers.PHOTO: AFP

SINGAPORE (REUTERS) - BlackRock and Royal Bank of Canada's BlueBay Asset Management are among asset managers exposed to embattled developer China Evergrande Group, while TCW and HSBC funds have closed positions, researcher Morningstar said.

In an analysis Morningstar published on Sept 24, Morningstar also said UBS Group and London-based Ashmore Group funds retained significant holdings in Evergrande debt, based on data current at August-end. Funds run by Fidelity and SinoPac held sizeable investments, it said.

BlueBay told Reuters its holding was "very limited" and that it has been reducing it since the end of August. None of the other asset managers provided comment.

Evergrande owes US$305 billion (S$413 billion) and has run short of cash. Some investors worry a corporate collapse could pose systemic risks to China's financial system and reverberate around the world.

Last week, Evergrande failed to pay interest on a US$2 billion dollar bond maturing in March. It will default if it makes no payment within a 30-day grace period.

HSBC Holdings' asset management division and fund manager TCW exited Evergrande positions in September and August, Morningstar said. HSBC declined to comment and TCW had no immediate response.

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

Fellow Swiss bank UBS has Evergrande debt exposure totalling about US$283 million across multiple portfolios, Morningstar said. Ashmore's runs to US$146 million. Both declined to comment.

Morningstar had earlier noted BlackRock's exposure had recently increased. In its Friday analysis, it said BlueBay had "gradually started adding".

"The investment team proactively reduced exposure to the company earlier this year," BlueBay said in a statement.

Morningstar did not give a dollar total for BlueBay exposure, though the researcher listed two BlueBay funds in its top exposure lists with exposure of about US$8 million in July, along with an index-tracking fund managed by BlackRock which it said had about US$1.5 million in exposure in September.

Blackrock declined to comment.

Evergrande's dollar bonds have been tumbling since May when the group was late in paying suppliers. A US$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 Group - 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," Mr Sheldon Chan, portfolio manager of T. Rowe Price's Asia credit bond strategy, said in an e-mailed response.

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