There is nothing new about the Chinese Premier stating that defaults are likely to rise
There is nothing new about the Chinese Premier stating that defaults are likely to rise. The key for investors is remembering that this will not be a repeat of the Lehman Brothers bankruptcy. These trusts and other Chinese shadow bank loans are not connected like was the case in 2008/09 in the US. However, just as sure as we can be that isolated defaults are not interconnected, so can we be assured that slower credit growth in the shadow banks will weigh on Chinese growth and it is likely to slip into the 6% range over the next year and any stock or sector that require robust Chinese growth are likely to be subjected to downside risk. The key here is stock selection, and ensuring that exposures all have strong balance sheets and a robust operating model as these are the easiest and the best form of risk management.