UBS warns of risks from China's unhedged debt

Singapore

UBS Group AG is flagging risks from China's US$1 trillion worth of unhedged foreign debt as forecasters see bets against the greenback unwinding in 2015.

The world's second-largest economy is exposed to shifts in currency and interest rates as never before because of expanding international trade and easing foreign-exchange regulations, said Stephen Andrews, head of Asia banks research at UBS in Hong Kong. Daiwa Capital Markets has a US$1 trillion estimate for carry-trade inflows since 2008, bets on the difference between yields in China and overseas. It sees a 5.7 per cent drop in the yuan next year.