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Ukraine puts Hong Kong-based financier on ‘defensive’

Uncertainty facing investors and lenders from the Russia-Ukraine backdrop exceeds levels during the early days of the pandemic, says SC Lowy chief investment officer Soo Cheon

The fixed-income specialist SC Lowy, which also has been an opportunistic shipping financier, is preserving cash and waiting for better near-term visibility 

SC LOWY, the global financial services group, has taken up a “defensive mode” as a result of the market uncertainty compounded by the Ukraine situation.

The Hong Kong-headquartered fixed-income specialist is taking a wait-and-see approach amid the highly fluid situation, according to its co-founder and chief investment officer Soo Cheon Lee.

The company’s shipping exposure is almost zero after successfully withdrawing from the debt restructuring of Zim and Pacific International Lines, two large carriers in container shipping, which has become a lucrative business.

“We would like to preserve more cash rather than try to deploy capital today until we have better visibility over the next two to three months,” Mr Lee told Lloyd’s List.

Visibility is in short supply at the moment owing to Russia’s military incursion into Ukraine and the escalating levels of sanctions being used against Moscow.

Reports of US and its European allies planning to ban Russian crude exports have pushed oil price to as high as almost $140 per barrel and stoked concerns about higher inflation that could hobble the global economic recovery.

The International Monetary Fund has also warned that the the war and related sanctions will have “severe” economic consequences by creating a shock to the already inflated commodity prices.

“Inflation is the big concern in the longer-term horizon. It will slow down global trade and as a result the demand for vessel tonnage will decrease over time,” said Mr Lee, adding that the longer the situation continues, “the implication for the shipping will be much bigger.”

In addition to the European conflict, China’s economic outlook is also unclear, he said.

He remained sceptical about whether the country could overcome its property market woes, despite a 5.5% growth target recently set by Beijing for 2022, which is at the higher end of the range forecast by economists and indicates more stimulus measures are on the way.

Meanwhile, the impact of the Chinese government policy shifts, including those on decarbonisation, will also takes time to pan out.

Another factor leading to Mr Lee’s caution is elevated asset prices. In shipping, prices of containerships and dry bulkers have both reached record highs.

“That is crazy. Despite all the uncertainties around the world, assets remain very expensive.”

He said the crystal ball nowadays was even cloudier when compared with the early days of the pandemic.

“Even during the coronavirus outbreak there were uncertainties, but I would not say I wanted to be more defensive, no. I would tell you that I wanted to deploy capital and it was good time to buy.”


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