Kyle Bass, the hedge fund manager who’s wagering on a slowdown in China’s economy, said Hong Kong’s property market is in “free fall” and the credit expansion in Southeast Asian emerging markets will unravel.

“Hong Kong’s in a worse position than it was in prior to the ’97 crisis today,” Bass said at the SkyBridge Alternatives Conference in Las Vegas on Wednesday. He said credit in Asian emerging markets has grown “recklessly,” citing Malaysia and Thailand.

Bass, famed for betting against U.S. subprime mortgages prior to the housing crash, is predicting losses for China’s banks and raising money to start a dedicated fund for bets in the nation. He said last week at a conference that investors putting money in Asia should ask themselves if they can handle 30 percent to 40 percent writedowns in Chinese investments.

“China may be able to not tell the truth about specific output levels, or GDP figures -- they might be able to fudge those numbers for a while,” Bass said at Wednesday’s conference. “But their trading partners kind of tell the truth, and you’re already seeing what’s happening in their primary trading partners.”

The Chinese credit system, according to Bass, is “one of the biggest macro imbalances the world has ever seen.” The fund manager said China is already experiencing a “hard landing as we speak.” He said he isn’t a “permanent bear” on China, instead describing himself as a pragmatist.

Paul Brewer, who runs Rubicon Fund Management out of London, said on the same panel that China’s economic problems are worse than the U.S. subprime housing crisis.

Ken Tropin, founder of Graham Capital Management, said the recent surge in iron-ore prices is “symbolic that things may become unglued” in China. Tropin said even though it’s a crowded trade, he’s bullish on gold.

Source:
courtesy of BLOOMBERG

by Saijel Kishan & Katia Porzecanski

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