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YesInvestment banking jobs are disappearing. Most businesses have long been replaced by machines and computer algorithms. almost all equity Trading is now done electronically. Even high-yield corporate bonds, an opaque corner of the market where order Wealthy customers are often put on sumptuous meals, being interrupted. in America, 37% of these transactions are done electronically, up from 21% at the beginning of 2019.
This year too, China ruthlessly followed the engines of job creation. Big technical action and Beijing’s reluctance Let your hottest unicorn go public in New York Viable career paths are closing. Over the years, thousands of worker bees in Hong Kong acted as bridge between two countriesConnecting Chinese startups with American savers. That tie is being broken.
But all is not lost! There is one last frontier where finance careers are protected from machines and autocrats.
I’m talking about the world of dollar-denominated bonds sold by companies in emerging markets – especially China. They have proven to be surprisingly resilient to disruptive forces. In just five years, China’s issues flew in the air. There are now about $126 billion in notes outstanding that offer at least a 7% coupon — off the charts in a world of near-zero benchmark rates. Everyone wants a piece, from global asset managers like BlackRock Inc. and Ashmore Group plc to the wealthy private banking clients of HSBC Holdings plc and UBS Group AG. Credit hedge funds are also dabbling. And now, as the defaults start accumulating, If doing a day-to-day credit analysis on China’s real estate developers doesn’t appeal, you can go into distressed-debt restructuring instead.
Granted, machines can improve performance. Corporate debt is much more complex than stocks, and even the most knowledgeable traders can’t keep track of all yield curves. For example, China Evergrande Group has just one stock listing. Hong Kong but $13 denomination bonds are outstanding (and another in dollar-based Hong Kong currency) – With maturities from 2022 to 2025 and from two issuing entities that offer different degrees of guarantee. Computer algorithms that compare bond contracts and yield spreads can be extremely helpful.
However, a good trader with quick judgment is inevitable. Rumors abound, and what sounds good on paper can turn into sour lemons. Commercial banks and those with extensive networks within the real estate business are especially valuable. Their price is in lakhs.
Case in point: Beijing-based developer Modern Land China Co. In mid-October, the company asked investors for a three-month extension to repay a $250 million bond on the 25th. On paper, the proposal sounded good. the promised modern land buy back 35% bond on the original due date and said its controlling shareholders would lend the company approximately $124 million. Notes jumped. A week later, the company offer withdrawn And missed. Could computers have guessed the hidden change of heart?
Or consider Evergrande. It became a defaulter, not on its own bonds. Note that he privately provided guarantees for a joint venture in which he held a stake., As we learned, this year’s big landmines were private bond or personal loan Where loan documents are not available to most mortals. In this hazy world, the reporting skills of humans are far more valuable than computing power.
And social media needs to be understood. China’s financial blogosphere is active and often contains fast, direct information. But they do not take names for fear of censorship. For example, the widely followed blogger, whose pen name can be translated as “watermelon brother”, refers to China Huarong Asset Management Company as “thick eyebrows, big eyes” – understood as prominent facial features reflecting the fact Goes until its latest reorganization, it was majority owned by the Ministry of Finance. Ping An Insurance Group is “orange factory”, probably because that is the color of the company’s logo. Often, blogger’s posts dotted with “xxx” are so cryptic that I have to ask my smartest sources to explain it for me.
While the liquidity crunch has been brutal on developers, Beijing has no interest in hitting the offshore dollar bond market. Eventually, hundreds of local government financing vehicles, which do the same thing as developers, but have much worse financial standing, borrow there. For example, Chongqing Nan’an Urban Construction & Development Group Company does urban-renovation projects in the western metropolis, not as Casa Group Holdings Ltd does around its home base of Shenzhen. In the meantime, investors will keep coming back. The yield is just too much to ignore. This market is down but not out.
Computer algorithms map trends and look for outliers that are constrained to converge. But here’s the beauty of investing in China – it’s still emerging and trying to figure out what it wants to be – so there’s no trend. Distressed debt investing will be tough work. There will be betrayal, heartbreak and a haircut. And that is why it is the last safe place where computers cannot replace humans. ,bloomberg
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