China Deleveraging Makes Veteran Hong Kong Investor `Very Happy'

  • Economic stability means now is good time to address problems
  • Cheah co-founded value-based investment fund in 1993

China’s recent crackdown on leverage may be causing disruption in its domestic financial markets, but it’s delighting at least one veteran investor.

"We should be very happy, and we are very happy" about the measures being rolled out by China’s regulators, said Cheah Cheng Hye, chairman and co-chief investment officer at Hong Kong-based Value Partners Group, which he co-founded in 1993. The resultant volatility in financial markets is "extremely acceptable," he said, speaking on the sidelines of an event at Tsinghua University PBC School of Finance in Beijing on Thursday.

Cheah, who started out as a journalist before working in market research in the 1980s, saw recent market moves as within the "normal fluctuation range," and not something longer-term players should be concerned about -- indeed, there will be greater opportunity to spot good companies, he said.

The bigger danger would be failure by authorities to address the growth of riskier assets including wealth-management products, he said. "We shouldn’t be afraid of our own shadow, but we should be afraid of shadow banking," he said. The broader concern: China ending up with a crisis similar to the U.S. in 2008.

With stable employment, steady economic growth, and gains in exports, now is a good time for policy makers to act, he said. Side effects could include a slowdown in credit expansion and a moderation in growth in infrastructure and real estate, but "that’s OK," he said.

Read: QuickTake Q&A on China’s Deleveraging Crackdown

— With assistance by Miao Han

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