(Bloomberg) -- Credit investor SC Lowy Financial HK Ltd. has “very little exposure to China” and finds “the credit space uninvestable there,” according to the firm’s chief executive, citing the country’s murky legal proceedings and poor corporate disclosure.
“We believe that the lack of clear legal process and financial information means that the opportunity is a macro thesis, opposed to our investment philosophy of detailed corporate analysis coupled with downside protection,” Michel Lowy wrote in response to questions from Bloomberg News.
SC Lowy decided to reduce exposure to China since at least May 2022, due to uncertainties and longer-than-expected debt restructuring by the country’s distressed developers, Lowy said in an interview with Bloomberg TV at that time.
Lowy’s comments mark the latest expression of pessimism among key investors as China’s unprecedented property debt crisis unfolds, with risks spreading from major private builders to state-linked peers once considered much safer. They also reflect deep-rooted concerns about the longer-term, more fundamental challenges faced by Beijing to revive investor confidence, even as authorities have escalated a housing rescue campaign.
In contrast to the bleak assessment of Chinese corporate debt, SC Lowy is notably more upbeat about the prospect of private credit in Asia. The firm raised $450 million for its direct-lending strategy in the region as of September 2022, targeting special situations including private lending and nonperforming loans.
“In Asia, we see very compelling investing opportunities in private debt transactions mostly in Korea and India, where we benefit from our strong teams on the ground,” Lowy wrote in his latest response.
--With assistance from Bei Hu.
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