How to navigate Evergrande crisis, China experts explain risk/reward

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Big-name investors are navigating the China Evergrande crisis right now by turning to these 8 experts from firms like Muddy Waters and BCA Research

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Bearish investors called the Evergrande crisis China's Lehman moment, but investment banks including Citi and Barclays have dismissed that possibility.

"Even then, the reversion to autocracy and large financial imbalances make policy overtightening a major risk for the global economy, now and in the coming years," he added. Junheng Li is the founder and CEO of JL Warren Capital.Li thinks Chinese authorities are trying to manage a soft landing scenario while allowing Evergrande to fail.

"This is why investors believe that the actual balance sheet of the developers is much bigger than reported, even including equity-linked debt instruments," she said,"and that overly stretched balance sheet is not unique to Evergrande, but common to the real estate industry as a whole." To manage the Evergrande fallout, the priority for Beijing will be dealing with consumers who bought pre-paid apartments, he said. In his view, domestic investors, particularly holders of Evergrande's wealth management products, are likely to get hit hard. Foreign investors, while they are not the specific target of these actions, are far down the list of parties that the government is worried about, he added.

Investors are also concerned with whether the Evergrande crisis will become a widespread debt crisis, affecting other developers and the entire real estate sector in China. As for investors of Evergrande, debt holders will take a hit based on seniority, equity holders may very well be wiped out, and domestic banks' profits will also likely be negatively affected. "Already, share prices of several key bondholders such as BlackRock have fallen off sharply," Wang said."More bloodletting is possible."

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大牌投资者现在正通过向浑水公司和BCA Research等公司的这8位专家求助来应对中国恒大危机

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