By Feng Tao
Selina Zheng, President of DCL Investments said that China’s economy will still maintain a relatively strong growth trend in the future. Although it is now undergoing a mid-term adjustment process, this is also the best time for distressed asset investment.
FT Chinese: How to understand the phrase “distressed asset investment: good business in bad times”?
Selina Zheng: I think the right thing about this sentence is the distressed, that is, the macro economy does encounter challenges in the process of asset investment, which includes both the challenges of the macroeconomic environment and the micro-level challenges of specific industries. With such adjustments, a new round of investment opportunities for distressed assets will be created, so this statement, to some extent,is correct. But this statement is not entirely correct, because I personally believe that the best time to invest in distressed assets does not occur in a situation of economic collapse, political instability, and social turmoil, but when an economy or an industry encounters certain kind of adjustment, especially when the asset holders face reshuffling during the in-depth adjustment process, these assets have room for renegotiation. In other words, the essence of distressed asset investment is not that there is a problem with the asset itself, but a variety of problems with the original holder of the asset. As a new buyer, we have bargaining power with the original holder. This means that we can leverage the fluctuations in the external macro environment to trigger the plight of the original asset holders and obtain the high-quality assets we believe at a more reasonable price or even lower prices.
“Bad” in “good business in bad times” only expresses a part of the meaning in the middle, that is, large fluctuations and adjustments in the macroeconomic cycle, but in fact, the regions and industries targeted by distressed investments are still in the medium and long term in the future. The overall situation is good. Under such background, it is the best opportunity for investment in distressed assets.