For much of the past year, we have seen a steady stream of articles and predictions that the build-up of nonperforming loans in China and Italy will burst, wreaking havoc on global financial markets. As a bellwether of investor interest, Crosswater has had more investor consultations with distressed creditor investors this year than in the prior three years.

The ballooning amounts of NPLs officially reported (and not reported) has sparked investor interest that the long-awaited markets in those two countries will open to foreign investors. Distressed debt investors invariably want to understand the pros and cons as well as the differences that foreign investors in NPLs need to consider in evaluating distressed debt opportunities in both markets. The goal of this article is to summarise the differences between the opportunities in the two markets and to offer our insights as to which market might offer the best opportunity to make money in 2017.

NPL levels and t