Defaults normally take a couple of years after the first warning signs and therefore can usually be predicted, said Vivek Bommi, European high yield and global high yield manager for Neuberger Berman. He explains some of the red flags and his approach to risk.
Asset managers believe that the country’s bond defaults are a concern, but stopped short of saying they would spread outside the energy-related sectors.
Onshore bond defaults controlled by Chinese authorities are welcome in principle, but in practice it is still unclear how the default process will work, according to Fidelity International.
The asset class is undergoing significant changes as authorities pull away from an implicit promise to protect investors from bond defaults, said Chi Lo, Greater China senior economist at BNP Paribas Investment Partners.