California Fund Negative On China Banks

California based SW Asset Management, a $240 million investment advisory, says it is shorting Chinese banks and thinks other investors should, too. Especially the so-called policy banks that are used as instruments to pump capital into the economy during economic slowdowns.

�China banks are a short,� says David Hinman, a fund manager at SW Asset Management in Newport Beach. He manages fixed income portfolios for San Francisco based $5.1 billion investment company Forward Management. �We feel particularly negative on China Development Bank. They have a lot of dollar debt outstanding and we believe they have not properly disclosed their risks,� he says.

�We don�t think they�ll default, we just think that they�re going to need more capital. A recapitalization could involve equity participation and that would push bond yields higher,� he says. The AA rated debt has a current yield of around 3% on its 2015 bonds.