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Hedge fund manager Kyle Bass warns of China’s accelerating bad debt

Thursday, September 17, 2015

Komfie Manalo, Opalesque Asia:

Kyle Bass, founder and managing partner of Hayman Capital Management, a Dallas-based hedge fund, has warned of accelerating bad debt in China.

In an interview with CNBC’s David Faber on Squawk on the Street on Tuesday, Bass said that in China’s banking sector, "loans greater than 90 days past due grew 167% in the first half of 2015."

He went on to say, "Those that are watching whether Chinese stocks go up or down aren't paying attention, in my opinion, to what the real problem is. And the real problem is the loans in this banking sector."

He added that we are just entering the non-performing loans cycle in Asia. Non-performing loan cycles take roughly 10 to 12 quarters to hit their peak. "I think we are one or two quarters in and the next two years are going to be tough."

He explained that since the 2007 global financial crisis, the Chinese bank assets have risen 400% to nearly $31 trillion against an economy with an estimated $10 trillion in GDP.

"When you run a bank expansion that aggressively, that quickly, you are going to have some losses," he said. "And our assertion is that you're just entering the nonperforming loans cycle in Asia. And the scary thing about that is… if you have $30 trillion in your banki......................

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