UBS Says Hong Kong Traders Should Be Worried Amid China Defaults
- Foreign investors yet to price in risks from defaults, Lu says
- End of implicit state support to drive up funding costs
China May Loosen Bad-Loan Provision Rules
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China’s state-backed companies no longer have the ironclad support of the government -- and that’s bad news for the equity bull market in Hong Kong, says UBS Group AG.
Three of the seven Chinese companies that defaulted on debt repayments this year are partly owned by the state, including Baoding Tianwei Group Co. The end of implicit government support will drive up funding costs and undermine foreign investor confidence in the 20 percent rebound by the Hang Seng China Enterprises Index, said Lu Wenjie, a Shanghai-based equity strategist at UBS.