Evergrande’s fate and what its failure could mean for China’s economy have divided some of the world’s best-known investors. The billionaire investor George Soros recently argued that an Evergrande collapse would set off a broader economic crash, while another billionaire investor, Ray Dalio, argued this week that an Evergrande default was “manageable.”
Investors in the dollar-denominated debt include the Swiss bank UBS, the asset manager BlackRock, the British bank HSBC Holdings, as well as a number of hedge funds. The bonds are linked to various private and public companies that are part of Evergrande but distinct from its core property business, including an electric-vehicle division. Those businesses could still have value even if the real-estate arm collapses.
Despite the lingering uncertainty, stock investors seem to expect a better outcome from Evergrande debacle than they did earlier in the week. On Wall Street, the S&P 500 closed up more than 1 percent on Thursday, recouping its sharp losses from earlier in the week — in part as executives at two of Evergrande’s debtholders played down the risk.
Ralph Hamers, the chief executive of UBS, said at an investor conference on Thursday that the bank’s direct exposure to Evergrande was “immaterial,” adding that its troubles have “not been keeping me up at night,” according to a transcript from the software firm Sentieo.
Noel Quinn, the chief executive of HSBC, acknowledged at the same conference that Evergrande’s challenges might seep further into the equity and credit markets.
“I’d be naïve to think that the turmoil in the market doesn’t have the potential to have second-order and third-order impact,” he said, calling the Evergrande situation “concerning.”
A representative for BlackRock declined to comment.
Central bankers outside China have also played down the risk this week. On Wednesday, the Federal Reserve chair, Jerome H. Powell, described Evergrande’s troubles as “particular to China” during a news briefing, and on Thursday, Sam Woods, deputy governor of the Bank of England, told Reuters that the exposure of British banks and insurance companies to Evergrande was “not material.”
Cao Li contributed research and Alexandra Stevenson and Lauren Hirsch contributed reporting.
Read More: China Detains Top HNA Group Executives