StockTalk(8.15): China's trust industry in crisis: defaults and shrinking investments raise concerns - What happened?
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China's trust industry is in crisis as defaults and shrinking investments raise concerns. These loosely regulated firms pool household savings, invest in various assets, and have experienced billions of dollars in defaults. The industry had contracted by about 20% since 2017 when regulators began cracking down on shadow banking.
Zhongzhi Enterprise Group, a prominent player, manages around 1 trillion yuan (S$187.1 billion) in assets. Its subsidiary, Zhongrong Trust, has 270 products totaling 39.5 billion yuan due this year, with an average yield of 6.88%. Payment failures and lack of transparency surround Zhongzhi and Zhongrong, raising concerns and prompting social media circulation of unverified letters about delayed payments and potential operational issues. Over 150,000 investors are affected, with outstanding investments totaling 230 billion yuan.
Even in Singapore, Dasin Retail Trust has also received a notice of default on its offshore loan facility of up to S$430 million. These incidents highlight the challenges in the trust sector, emphasizing the need for regulatory measures.
How have your recently held REITs been performing?
Additionally, given the crisis in the trust industry, what is your current outlook on the trust market in China?
Are you closely monitoring it for potential risks and opportunities?
Additionally, given the crisis in the trust industry, what is your current outlook on the trust market in China?
Are you closely monitoring it for potential risks and opportunities?
Join us and share your thoughts on today's topic. Please leave a comment below to share your opinion with us. Your feedback is valuable, and we appreciate your participation.
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Moomoo SGOP :
How do you perceive the future of the Chinese trust industry?
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ZnWC : Trust businesses in China are loosely regulated firms that pool household savings to offer loans and invest in real estate, stocks, bonds and commodities. The sector was once seen as a safe place for wealthy Chinese to park their money for hefty returns. But trust firms have defaulted on billions of dollars of investment products in recent years and the industry has shrunk by about 20 per cent from its peak in 2017, when regulators began clamping down on the nation’s shadow-banking excesses.
Default in payment and transparency are issues that reflect the fundamental of the company. Without fundamental and loosely regulated, investors should not even put a single cent in the firm regardless on how attractive the returns. It reminds me of cryptocurrency investment 2 years ago. Due to lack regulation and transparency, cryptocurrency exchange platform collapsed one after another (Celsius, BlockFi, FTX and Hodlnaut). It looked like history repeating itself.
If you really want to invest in a Chinese company or REIT, ensure it is not exposed to any Trust firms.
Moomoo SGOP ZnWC:
CasualInvestor : Never had much confidence in Chinese companies. Likely also due to past news on how shady the companies are.