This has to be considered as a trading idea. If Evergrande should fail, HSBC is one of the main holders of the securities, between January and July, HSBC added 40% more in Evergrande bond shares, but total portfolio exposure is down to 1.22%. Are we really sure that there will be no contagion on financial groups?
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Real estate comprises nearly 8% of China’s economy. Construction is another ~8%. So, all in all, you’re looking at 16% of the second largest economy in the world experiencing the bankruptcy of one of its largest players. This has significant implications for everything from commodities to finance.