On June 14, 2019, Ms. Selina Zheng, President of DCL Investments, delivered a keynote speech at the “Openness and Responsibility-2019 Global Investment Summit” hosted by “《FOF Weekly》”.
Ms. Selina Zheng first started with the North American high-yield bond crisis in the 1980s and shared the development history of global distressed asset investment. Then she shared the opportunities for distressed asset investment in China partly related to policies such as “restructuring” and “deleveraging” since 2013.
Ms. Selina Zheng mentioned that in terms of non-performing loans of commercial banks, according to statistics, at the end of 2018, the balance of non-performing loans on the balance sheet of domestic commercial banks has exceeded 2 trillion RMB. In terms of risk projects in the loan & trust industry, at the end of 2018, the scale of high-risk projects in the domestic trust industry had exceeded 200 billion, and the number of high-risk projects exceeded 800.
With regard to credit bonds, with the break of the belief of “Rigid Payment” in China’s bond market, the risk of bond default has spread to various industries. In 2017, default bonds were mainly concentrated in traditional industries with overcapacity. By 2018, the debt crisis has spread to the more service & technology related industries such as IT, cultural, entertainment, and real estate industries. At the same time, due to economic fluctuations, corporate profitability has declined, and negative events on China’s credit bonds have occurred frequently. According to the negative event report statistics from WIND financial terminal, from 2014 to June 10, 2019, there were more than 55,000 negative events, involving more than 26,000 bonds and more than 1,700 bond issuers.
In addition, Ms. Selina Zheng also elaborated on how to seize new opportunities for distressed assets investment. With the development of the market, focusing on restructuring has become an important strategy for distressed assets investment. And this strategy also puts forward higher requirements on the platform establishment, institutionalization and active management capabilities of investment firms. Institutional investors must have a keen ability to capture special situation investment opportunities and efficient distressed asset disposal ways in order to achieve substantial development in the industry.