SHANGHAI, October 13 (Hfrance.fr) - Concerns about the possible spiraling effects of a debt crisis at developer China Evergrande Group (333.HK) pushed Chinese high-yield spreads to record highs on Wednesday, days after the company missed another dollar bond deadline.
The company, which has over $ 300 billion in liabilities, missed its third round on Monday of interest payments on its dollar bonds in three weeks even as other companies warned of defaults.
In the clearest sign to date of global investor concerns about the spread of debt contagion, the corrected option spread on the ICE BofA Asian Dollar High Yield Corporate China Issuers Index (. MERACYC) has reached a new all-time high of 2,337 basis points Tuesday and Friday, above a previous sumt by 2,069 basis points on Friday.
Investment quality spreads also hit their highest level in more than two months. (.MERACCG)
"We see a risk that a disorderly correction in the real estate market will lead to sharp price declines, affecting the personal wealth of owners, " Kim Eng Tan, credit analyst at S&P Ratings, said in a report.
"Such an event could also contribute to large-scale losses by investors in wealth management products, and the entrepreneurs and service companies that support developers. "
Evergrande hasn't paid nearly $ 150 million dollars in coupons on three bonds due Monday, following two other missed paymentsin September.
Although the company has not technically defaulted on these payments, which have 30-day grace periods, investors say that they expect a long and drawn-out debt restructuring process. learn more
Chinese real estate company bonds continued to fall on Wednesday, including seven of the top 10 losers among corporate bonds traded in Shanghai.
Bonds issued by developers including Shanghai Shimao Co Ltd (600823.SS) Chinese Aoyuan Group (3883.HK) and Country Garden Properties Group fell entre 1.6% and 7.4%, according to exchange data.
Dollar bonds also fell, although traders had stated that limited market liquidity following previous routs meant prices were only indicative, with negotiable prices possibly being 10-20 points lower than screen prices.
Marketaxess cited a Kaisa Group Holdings (1638.HK) June 2026 bond down 0.9% to 41.125 cents. Its return reached around 40%.
On the stock markets, a sub-index listing A shares of real estate companies (. CSI000952) fell 0.7% against a 1.2% rise in the blue-chip Index CSI300 (. CSI300) .
Markets in Hong Kong were closed on Wednesday due to a typhoon affecting the city.
Evergrande main unit, Hengda Real Estate Group Co, faces a 121.8 million yuan onshore bond coupon payment on October 19 and Evergrande has another $ 14.25 million bond coupon due on October 19. October 30. learn more
Debt pressure extends far beyond Evergrande. Chinese real estate developers have $ 555.88 million in high-yield dollar bond coupons due this month and nearly $ 1.6 billion before year-end, and data from Refinitiv show at least $ 92.3 billion in bonds from real estate developerss due next year read more
Evergrande 's mid-size rival, Fantasia (1777.HK) also already missed a payment and Modern Land data (1107.HK ) and Sinic Holdings (2103.HK) attempt to delay payment terms that would still most likely still be rated by default by major rating agencies.
" These stories challenged the idea that Evergrande is one of a kind, "wrote analysts at Capital Economics in a note.
While China's policymakers will likely be able to avoid a "doomsday scenario ", the oversized real estate sector will continue to weigh on the world's second-largest economy, have- they stated.
"Even after an orderly restructuring of the most affected developers with minimal contagion to the financial system, construction activity would almost inevitably slow down much more. "
The IMF said on Tuesday that China has the capacity to resolve Evergrande 's debt problems, but warned that an escalation of the situation could lead to the emergence of broader financial stress. learn more
China's $ 5,000 billion real estate sector is about a quarter ofChina's economy by certain measures and is often a major factor in Beijing's policy making. Andrew Galbraith reporting; Editing by Muralikumar Anantharaman and Kim Coghill
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