Glodman Sachs Invests in Chinese Property Sector while the World Shy Away
Portfolio managers at Goldman believes the market is highly overpricing the contagion fear and their rationale justifies it
Even though other investors are shying away from investing in China amid the contagion fear centered around the Chinese property sector, Goldman Sachs Asset Management sees this a lucrative opportunity to buy, according to Bloomberg.
Angus Bell, a member of the Goldman’s portfolio management team told Bloomberg, the firm has been adding “modest amount of risk” through high-yield offshore bonds denominated in dollars, issued by Chinese property developers.
According to Bell, contagion fears lead the market to overestimate risks and created a perfect opportunity to buy these high-yield bond. His rationale includes property sector is the key driver of China’s economic growth for the past two decades and it would be unlikely Chinese authorities would allow such large number of developers to fall adversely impacting economic growth.
He additionally added the market is highly underpricing the extent of the distress in the property sectors.
A Bloomberg index of Chinese junk rated dollar bonds has fallen 22% while yields soared since the beginning of September.
Goldman also believes onshore bonds are “risk off trade” given the People’s Bank of China’s willingness to inject liquidity in to market to revive the growth of the economy.
According to Bloomberg estimates, the central bank may cut required reserve ration by 50 basis points in coming months as the urgency for withdrawing monetary support climbs.