October's most read: What next as Evergrande misses second coupon payment; ESG-friendly crypto emerging as institutional demand surges

Evergrande not the first debt debacle in China, but its $305 billion debt, if unpaid, will have a ripple effect on the economy; ESG-friendly crypto products becoming hot commodities for institutional investors; GIC sees no systemic risk in Evergrande crisis, but Soros Fund presses pause on China; Which assets will perform under stagflation?; Family offices taking ESG into their own hands as regulators play catch up; and more.
October's most read: What next as Evergrande misses second coupon payment; ESG-friendly crypto emerging as institutional demand surges

China Evergrande Group, one of China's largest real estate developers, missed two offshore coupon payments in as many weeks.

Neither bond is in default yet; the bond terms allow the group a grace period of 30 days to make its payment. But investors are worried. After years of aggressive expansion, the group is the most indebted property developer in the world, owing creditors more than $305 billion, the equivalent of 2% of China's GDP.

The firm's share price has fallen 85% from a year earlier and investors have lost hope for a bailout from the government.

“Evergrande is not the first case of a debt debacle in China. However, the difference with Evergrande is two-fold: firstly, it is more entrenched in the Chinese economy; and secondly, it is less likely to get direct government support,” Arthur Lau, co-head of emerging markets fixed income at PineBridge, told AsianInvestor.

Crypto products that tick all the ESG boxes are fast becoming hot commodities for institutional investors, driving blockchain-focused venture capitalist funds and hedge funds to adopt sustainable products and technologies. 

As cryptocurrencies such as Bitcoin and Ethereum rise in popularity, many believe the energy footprint of the crypto industry is unsustainable at its current pace, leading investors with a focus on environmental, social, and governance (ESG) issues to become hesitant about digital assets, despite the potential profits.

However, carbon-neutral and ESG-friendly crypto investment vehicles have emerged, and institutions, pension funds, and family offices are getting in on the action.

Singaporean sovereign wealth fund GIC Pte does not view the Evergrande crisis as posing a systemic risk to China’s financial landscape despite uncertainty caused by the collapse of the property giant and China's wide-ranging clampdown on industries ranging from tech to online education.

Lim Chow Kiat, chief executive officer at GIC said that there had been warning signs before the potential collapse of Evergrande took centre stage. 

“For a number of years, China has talked about the need to rein in financial excesses, financial leverage on top of eliminating poverty and environmental pollution," Lim told the Bloomberg Invest virtual conference on Tuesday.

"These are the three sort of big evils that they had to tackle,” he said.

Market observers are discussing the prospect of stagflation - defined as persistently high inflation, high unemployment and stagnant demand, all at the same time - which dogged markets in the 1970s. 

It does share something similar – sky-high commodity prices, a disappointing unemployment rate, and cooling economic growth, which is a mix of the current energy crunch and the carbon-neutral transition.

Though there is no consensus about whether the market is approaching stagflation, or it is pointing to a healthy recovery, real assets are generally preferred amid price surges, while opinions vary on equities and bonds.

Asia Pacific regulators might be ramping up mandatory disclosures, but forward-thinking family offices, it seems, are already two steps ahead of them.

With a lack of standards persisting in Asia, family offices are paving their own way towards environmental, social and governance (ESG) investing, say experts, even as governments are rolling out consultation papers for climate-risk disclosures.

However, experts say investors continue to struggle to make sense of ESG data, in particular grappling with the “social” side of ESG, which remains sorely neglected by regulators.

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