U.S. Markets closed

China firm plans $1 billion distressed asset fund for foreigners

Benjamin Kang Lim and Koh Gui Qing

By Benjamin Kang Lim and Koh Gui Qing

BEIJING (Reuters) - A unit of one of China's biggest bad-debt banks plans to woo foreign investors with a $1 billion fund for soured property loans and distressed real-estate assets, reopening the sector to outsiders after a failed attempt last decade.

That the fund is being launched just as growth in the world's second-largest economy has slowed to an 18-month low and the housing market is losing strength is no coincidence.

China Orient Summit Capital, 80 percent owned by China Orient Asset Management Corp, will use its connections to help foreigners invest in an attractive but sometimes treacherous market for distressed assets, chief executive Lijian Chen said.

"We see the cycle coming," he said, referring to an expected cooling down in the housing market. "Especially since this is synchronized with the economy."

And China Orient Summit wants to be ready. Founded in February, it has sought regulatory approval for its new fund, which would target institutional investors and pension funds in the United States, the UK, and the Middle East.

"The best deal in any country, always, is going to be the off-market deal," Chen said in an interview at the firm's office in downtown Beijing. "You have to explore the relationship, you have to explore the off-market opportunity."

This was especially important as deals were often sealed behind the scenes, even at open auctions, he said. For instance, at a recent auction for a plot of land in the southern city of Ningbo, the winning bid went to a firm that promised the local government it would move its headquarters to the city, thereby lifting future employment and tax revenues.

"So if you just go there and say "OK, this is open price, so I'm going to put in my bid because I have capital", then you are just too naive."

LOCAL SENSITIVITIES

Direct foreign investment in property is strictly controlled by the government, which fears excessive speculation in the market. As such, although foreign investment in property is on the rise, it accounts for only a fraction of total spending.

China has always stood out among investors as a compelling market for buying bad loans and distressed assets, but never lived up to its potential. An attempt to launch a market for distressed assets quickly shriveled after in the mid-2000s.

Foreign investors said the market died because auctions were rigged, laws were opaque, and governments resisted corporate bankruptcies. In response, Chinese authorities said foreigners were trying to buy assets at unreasonably low prices.

Chen said the market is now more transparent, but investors still need to be mindful of social and political sensitivities when negotiating with governments about company closures.

As a unit of China Orient Asset Management Corp, one of four bad-debt banks created by Beijing to clean up the biggest Chinese banks which were technically insolvent in the late 1990s, China Orient Summit has the advantage of state backing.

Beijing Wutong Summit Investment Managing Center owns the remaining 20 percent of China Orient Summit.

China Orient Asset Management Corp can invest up to 20 percent of the new distressed fund.

FINANCIAL STRESS

As China's leaders slow growth rates down so they can overhaul the economy to make it more driven by consumption and less by investment, financial stress is clearly building.

Media reported on Wednesday that Nanjing Fudi Real Estate Development Co Ltd missed repayments on a 900 million yuan ($145 million) loan borrowed from a ship builder, becoming the latest in a string of corporate credit defaults.

Data on Friday showed China's home price inflation slowed to an eight-month low in March, and analysts expect the easing trend to continue.

Chen said some cities, including Wenzhou and Ordos, are burdened by an excess supply of homes and high prices, but declined to name other cities where distress levels are rising.

Wenzhou, a center for private businesses, is the only city in China where official data shows house prices are falling. Ordos is a former boomtown for coal miners but now notorious for its empty apartment blocks.

Still, investors who believe China will suffer from a messy bursting of a property bubble are misguided, said Chen.

"I have never believed that there is a property bubble. This country is just way too big," he said. "Easily, if you go inland, if you go west, those cities are far from developed."

  • Should I sell my $565,000 duplex and invest the money — or continue to collect rent?
    Business
    MarketWatch

    Should I sell my $565,000 duplex and invest the money — or continue to collect rent?

    Dear Moneyist, I purchased a duplex 20 years ago and am considering selling it. I paid $150,000 for the duplex, and spent about $55,000 on updates and renovations. A real estate agent has suggested selling it for $565,000, as a duplex, or converting it to condominiums and selling each for $300,000. Each unit currently rents for $1,900 per month. There is no mortgage and the largest annual expenses are taxes and insurance which total about $6,000 per year. The property is in good condition and I do not anticipate any major expenses in the near future. There are minor repairs and maintenance throughout the year which typically cost no more than $1,000. Don’t miss: Advisers say most investors can

  • What to Do With Your 401(k) When the Market Crashes
    Business
    Motley Fool

    What to Do With Your 401(k) When the Market Crashes

    Market crashes are scary. After a long bull market in which the S&P repeatedly hit new record highs, it's hard to see the retirement savings that you've worked for years to save in a 401(k) take a severe hit when the good times come to an end. The key to handling volatility is to be smart about risk management, anticipating worst-case scenarios and adjusting your strategy to allow for them.

  • Nathan Chen Just Stunned Every Figure Skater You've Ever Heard Of
    Sports
    Time

    Nathan Chen Just Stunned Every Figure Skater You've Ever Heard Of

    U.S. figure skater Nathan Chen set an Olympic record with six quad jumps in the men’s figure skating long program on Friday. Chen bounced back after a disappointing turn during the short program that left the skater in 17th place in the 2018 Winter

  • California law could allow illegal immigrants to vote
    U.S.
    Fox Business Videos

    California law could allow illegal immigrants to vote

    California Lt. Governor candidate Lydia Ortega (R) reacts to the state’s push to give illegal immigrants the right to vote once they get a driver’s license.

  • How effective was the Russian social media campaign? Here's a clue
    Politics
    Quartz

    How effective was the Russian social media campaign? Here's a clue

    One of the overarching questions about Russia’s online campaign to destabilize the US election is just how effective those social media efforts really were. Well, according to special counsel Robert Mueller’s indictment (pdf) of 13 Russian citizens and three entities, Russian trolls were persuasive enough to get at least one US citizen to stand up and wish their boss a very special happy birthday. The indictment says they used a social media account to arrange “for a real US person to stand in front of the White House…under false pretenses to hold a sign that read ‘Happy 55th Birthday Dear Boss.'” They reportedly told the American that it was for someone who “is a leader here and our boss…our

  • Lisa Marie Presley Says She's Over $16 Million in Debt, Divorce Documents Claim
    Business
    People

    Lisa Marie Presley Says She's Over $16 Million in Debt, Divorce Documents Claim

    According to the documents, which were filed on Wednesday and obtained by PEOPLE Friday, Justin Stiegemeyer, Presley’s current business manager who is responsible for “day-to-day finances and paying all of her bills,” disclosed that the 50-year-old had first learned of her debt while her old business manager Provident Financial Management was handling her finances. In the court documents, Stiegemeyer went on to claim that Presley owes almost $50K in credit card debt, although he added that she has been actively paying down the sum and has managed to pay off the debt on certain cards in full.

  • Delta Air Lines Wants the Boeing "797" ASAP: Here's Why
    Business
    Motley Fool

    Delta Air Lines Wants the Boeing "797" ASAP: Here's Why

    Last year, Boeing (NYSE: BA) strained its relationship with U.S. airline giant Delta Air Lines (NYSE: DAL) by attempting to have big tariffs imposed on Delta's purchase of CSeries jets from Bombardier. Many pundits saw Boeing's trade complaint as a risky move that could alienate a key customer -- especially after Delta ordered the Airbus (NASDAQOTH: EADSY) A321neo last December instead of Boeing's 737 MAX 10. Delta isn't going to make bad business decisions just to punish Boeing.

  • Bitcoin Cash, Litecoin and Ripple Daily Analysis – 18/02/18
    Business
    FX Empire

    Bitcoin Cash, Litecoin and Ripple Daily Analysis – 18/02/18

    Bitcoin Cash had a good start to the weekend, gaining 6.66% on Saturday to end the day at $1,629.5, outshining the likes of Litecoin that is considered to be one of Bitcoin Cash’s main competitors. The gains cement Bitcoin Cash in 4th place in the crypto rankings, with a market cap of $26.95bn, as Litecoin continues to sit a distant 5th with $12.64bn, much depending upon the success of LitePay that’s due for release in a week’s time. Perhaps of significance will be how Bitcoin, Bitcoin Cash, Ethereum and Litecoin fare on Coinbase’s commerce platform, with both businesses and consumers likely to favour one of the four cryptos that Coinbase has included for transactions.

  • Wells Fargo auditors could soon deliver another blow to the bank
    Business
    MarketWatch

    Wells Fargo auditors could soon deliver another blow to the bank

    Wells Fargo investors have learned a lot about the bank’s worsening issues recently, but they should be watching carefully over the next couple of weeks for possibly more bad news — from the bank’s auditors, KPMG. KPMG must opine on Wells Fargo’s WFC, -0.12% internal controls by around March 1, and investors might not like the answer: the very real possibility of an adverse opinion from the auditors identifying material weaknesses in the bank’s controls. On Feb. 2, the Federal Reserve Board released a consent cease-and-desist order that requires the bank to improve its governance and risk-management processes, including strengthening the effectiveness of oversight by its board of directors. The

  • Why General Motors Could Be Leaving Korea for Good
    Business
    Motley Fool

    Why General Motors Could Be Leaving Korea for Good

    In recent years, General Motors (NYSE: GM) has posted consistently strong profits in its two largest markets: North America and China. It's seeming increasingly likely that GM will ultimately have to end its manufacturing operations there to achieve this goal. Management first publicly raised the need for restructuring at GM Korea during General Motors' fourth-quarter earnings call earlier this month.

  • This Is Warren Buffett’s Top Equity Holding, Surpassing Wells Fargo
    Business
    Fortune

    This Is Warren Buffett’s Top Equity Holding, Surpassing Wells Fargo

    Warren Buffett's Inc. has taken a real shine to Inc. Berkshire boosted its holding of the iPhone maker to $28 billion at year-end, surpassing its stake in & Co., which was worth $27.8 billion on Dec. 31. Apple has continued to rally this year, increasing the value of Berkshire's stake to $28.6 billion based on Thursday's closing price.

  • Amerisource shares jump on Walgreens buyout report
    Finance
    Associated Press

    Amerisource shares jump on Walgreens buyout report

    Shares of AmerisourceBergen soared Tuesday on reports that Walgreens is pursuing a complete takeover of the huge drug distributor. The Wall Street Journal reported late Monday that Walgreens Boots Alliance Inc. reached out to AmerisourceBergen Corp. about a potential deal several weeks ago. Walgreens already owns about 26 percent of the company, according to data provider FactSet.

  • Iran Fails To Comply With OPEC Deal
    Business
    Oilprice.com

    Iran Fails To Comply With OPEC Deal

    The OPEC Monthly Oil Market Report is out production data for January 2018. All data, unless otherwise noted, is through January 2018 and is in thousand barrels per day. OPEC crude only production has held steady for three months.

  • Washington, D.C., Has Given the Boring Company a Permit for a Possible Hyperloop Station
    Finance
    Fortune

    Washington, D.C., Has Given the Boring Company a Permit for a Possible Hyperloop Station

    Washington, D.C., has issued a permit allowing Elon Musk's Boring Company to do preparatory and excavation work in what is now a parking lot north of the National Mall. The permit, reported Friday by the Washington Post, was issued way back on November 29th of 2017. The permit is part of an exploratory push by the city's Department of Transportation, which according to a spokesperson is examining the feasibility of digging a Hyperloop network under the city.

  • Gilead wins reversal of $2.54 billion hepatitis C drug patent verdict
    Business
    Reuters

    Gilead wins reversal of $2.54 billion hepatitis C drug patent verdict

    A federal judge in Delaware has overturned a jury's verdict requiring Gilead Sciences Inc to pay a record $2.54 billion because its hepatitis C drugs Sovaldi and Harvoni infringed a patent held by rival Merck & Co Inc. The verdict had been the largest ever in a U.S. patent case but U.S. District Judge Leonard Stark in Wilmington, Delaware, on Friday ruled Merck's patent was invalid. Gilead in a statement on Saturday said it always believed the patent was invalid and was pleased the judge confirmed that opinion. The December 2016 verdict followed a trial in which jurors found that Merck's patent on hepatitis C treatments, which it acquired in 2014 when it bought Idenix Pharmaceuticals, was valid.

  • Stock market will sell off by 30%: MacroMavens president
    Business
    Fox Business Videos

    Stock market will sell off by 30%: MacroMavens president

    MacroMavens President Stephanie Pomboy discusses her concerns over current economic conditions and the Fed’s impact on the stock market.

  • Germany's Figure Skater Just Went Full Game of Thrones. The Internet Can't Even Deal
    Entertainment
    Time

    Germany's Figure Skater Just Went Full Game of Thrones. The Internet Can't Even Deal

    Winter has officially come for the 2018 Olympics in PyeongChang, and it is epic. Germany’s figure skater Paul Fentz came blazing onto the ice suited up for battle as thunderous music from Game of Thrones played, thrilling the internet to no end.

  • Why Americans Started Buying Military-Style Weapons Like the One Used in the Florida Shooting
    News
    Time

    Why Americans Started Buying Military-Style Weapons Like the One Used in the Florida Shooting

    The shooting at Marjory Stoneman Douglas High School in Parkland, Fla., bore many of the hallmarks of the other school shootings that have shocked the nation over the course of the last weeks, months and years. Among those similarities was the weapon used by accused shooter Nikolas Cruz: the AR-15. This semiautomatic version of the U.S. military’s M-16 infantry rifle and similar weapons have been used in most of the deadliest mass shootings in the last decade, including the one at Sandy Hook Elementary School. In some states like Florida, they’re easier to buy than a handgun.

  • Mueller Deflates President Trump's Claim That Russia Meddling Was Hoax
    Politics
    Fortune

    Mueller Deflates President Trump's Claim That Russia Meddling Was Hoax

    Donald Trump has insisted for more than a year that Russians didn’t try to get him elected. Special Counsel Robert Mueller put an end to those claims on Friday, declaring definitively that they did. A federal grand jury indicted 13 Russian nationals and a so-called “troll farm” in St. Petersburg on Friday for a broad campaign to sway the 2016 election in Trump’s favor.

  • Commentary: Trump’s Immigration Plan Took a Well-Deserved Tumble. What’s Next?
    Politics
    Fortune

    Commentary: Trump’s Immigration Plan Took a Well-Deserved Tumble. What’s Next?

    The Trump administration repeatedly insisted during the Senate’s immigration debate this week that it would not accept any plan that did not incorporate its pillars for reform. By the debate’s end on Thursday, a bipartisan plan that would have provided a long path to citizenship for the Dreamers, significant funding for border enforcement, and some limits on family-based immigration failed to garner enough votes to pass. The president’s preferred bill received far fewer votes, yet again stymying the Dreamers’ 17-year quest for full membership in their nation.

  • We May Finally Be Turning the Corner on the Flu Epidemic
    Health
    Fortune

    We May Finally Be Turning the Corner on the Flu Epidemic

    The influenza outbreak that’s killed thousands of Americans and wreaked havoc on the lives of many more seems to have passed its peak and started a slow retreat. While it’s a good sign that flu activity is starting to level off, it’s a far cry from the precipitous drop in doctor visits typically seen when a busy season starts to come to a close. The CDC’s national map of influenza activity offers some hope.

  • 1 High-Yield Dividend Stock You've Never Heard Of
    Business
    Motley Fool

    1 High-Yield Dividend Stock You've Never Heard Of

    Income investors are always on the lookout for high yield dividend stocks, preferably the kind supported by stable businesses with ample cash flow and a long history of distributing some portion of it to shareholders. Enter Compass Minerals International (NYSE: CMP). You may have never heard of the company, but its business is simple to understand.

  • 3 Stocks I'm Buying After the Market Sell-Off
    Business
    Motley Fool

    3 Stocks I'm Buying After the Market Sell-Off

    Three stocks that I've identified are already prominent holdings in my portfolio: Alphabet Inc (NASDAQ: GOOGL)(NASDAQ: GOOG), Pattern Energy Group Inc (NASDAQ: PEGI), and Starbucks Corporation (NASDAQ: SBUX). In short, it has been a big winner in my portfolio.

  • 3 Hated Dividend Stocks to Buy Now
    Business
    Motley Fool

    3 Hated Dividend Stocks to Buy Now

    Investors seem to despise pipeline giants Kinder Morgan (NYSE: KMI), Enbridge (NYSE: ENB), and Plains All American Pipeline (NYSE: PAA) these days given that all three are down more than 20% over the past year. Enbridge's stock has lost about 20% of its value over the past year.

  • February Top Industrial Dividend Stock
    Business
    Simply Wall St.

    February Top Industrial Dividend Stock

    Industrial names generally suffer from deep cyclicality which can affect companies operating in areas ranging from machinery to aerospace to construction. As such, the position a company has relative to the economic cycle drives its level of profitability