Global Credit Outlook: APAC and Beyond | SALT iConnections Asia

TL;DR

Panelists discuss the current risks and opportunities in global credit markets, citing market dislocations, inflation concerns, and the need for liquidity as key factors impacting investment decisions.

Transcript

foreign good evening and good afternoon a very warm welcome to the last panel of Sword eye connections Asia I am Bowen Choi head of hedge funds and family offices in Bloomberg I run and look after the Apec hedge fund strategy for our business looking at sales strategies to grow Bloomberg's franchise across financial data and Enterprise Solutions I ... Read More

Key Insights

• 💳 Market dislocations in China's real estate sector offer investment opportunities in private credit, but investors should carefully assess the probability of default and access to underlying collateral.
• 🇨🇫 Monitoring inflation moderation and central bank communication is critical as interest rates and volatility increase. Signs of forward guidance and sustained evidence of inflation moderation are positive for public credit markets.
• 🔠 The market shift towards higher costs of capital and inflation, combined with supply chain disruptions, has created opportunities for private capital to invest in credit, hybrid, and equity assets.
• 🥰 Heart attack risks related to liquidity and leverage are a significant concern for investors in 2023 as central banks reduce liquidity and leverage in the system.

Questions & Answers

Q: How do market dislocations in China's real estate sector offer investment opportunities in private credit?

Market dislocations in China's real estate sector have led to increased credit spreads, creating opportunities to generate excess returns. However, investors should carefully assess the probability of default and the ability to access underlying collateral before investing in this sector.

Q: What factors should investors focus on going into 2023?

Investors should closely monitor inflation moderation and central bank communication. Signs of forward guidance by central banks and sustained evidence of inflation moderation are positive indicators for interest rate volatility and public credit markets.

Q: How has the increase in costs of capital and supply chain disruptions affected primary issuance markets?

Higher costs of capital and supply chain disruptions have made primary issuance markets challenging to access for all but the strongest companies. As a result, private capital has an opportunity to step in and invest in credit, hybrid, and equity assets.

Q: What risks should investors be most focused on in 2023?

One of the biggest risks in 2023 is the potential for heart attack risks driven by liquidity and leverage challenges. As central banks reduce liquidity and leverage in the system, businesses reliant on easy access to liquidity may face significant capital calls or asset sell-offs at distressed prices.

Summary & Key Takeaways

• Market dislocations have created opportunities for generating excess returns in private credit, particularly in China's real estate sector. However, investors should be mindful of differentiating between onshore and offshore credit markets.

• The historic increase in interest rates and volatility highlights the importance of monitoring inflation moderation and central bank communication. Forward guidance and sustained evidence of inflation moderation are positive signs for interest rate volatility and public credit markets.

• The market shift towards higher costs of capital and inflation, combined with supply chain disruptions, has made primary issuance markets challenging to access. However, this presents attractive opportunities for private capital to step in and invest in credit, hybrid, and equity assets.

• The ability to spot potential risks and navigate through the current market environment is crucial. The focus should be on identifying heart attack risks related to liquidity and leverage, as central banks reduce liquidity and leverage in the system.