![]() More broadly, real-estate firms have $30 billion of dollar debt due next year, amid continuing efforts by authorities to tamp down property-price inflation.Īny refinancing crunch could offer opportunities. The developer based in Beijing declined to comment when reached by phone. A spokesperson for the technology services firm in Beijing said the group has an ample credit line with lenders, with 62.5 billion yuan ($8.8 billion) untapped as of June, and cash of 45.3 billion yuan. Calls to the state-linked trading group based in Tianjin, southeast of Beijing, also went unanswered. Calls to the property developer in Shanghai seeking comment on its financing outlook went unanswered. Read how default risks are curbing demand for bonds from first-time issuers.Īmong the 25 stressed borrowers with debt due next year: That’s spurred a doubling in the amount of Chinese dollar bonds with stressed-level premiums since March. (Asian high yield is dominated by Chinese issuers.) At the same time, funds that focus on Asia investment-grade saw an inflow close to 1%.Īnother sign of investor concern: prices in the secondary market have slumped, driving up yields. Asian high-yield credit funds saw a near 3% outflow from their assets under management in August, according to Morgan Stanley (NYSE: Indeed, money managers have already started slashing their holdings of riskier companies. ![]() Chu predicts a full-blown shock will be avoided as enough investors have already begun to anticipate problems. “A lot of them were issued with a low interest rate not comparable to the credit risk,” she said. That’s according to Wonnie Chu, managing director of fixed income at GaoTeng Global Asset Management Ltd. Trouble is, a swathe of the borrowers with debt due next year lacked strong fundamentals, and took advantage of unusually sweet financing conditions back in 2017 - the year of the synchronous global expansion. Lowy advises sticking with companies with strong cash flows. “We are on the verge of a massive snowball effect,” where defaults spur funds to take money out of high-yield debt, driving up yields and making it all the harder for firms to refinance, he said. “This is a market where you want to go for safer bets rather than be a hero,” said Michel Lowy, chief executive officer at Hong Kong-based SC Lowy, which specializes in fixed income. ![]() For those lured by juicy yields in today’s low-rate universe, that means danger. With Chinese policy makers emphasizing the need to continue a campaign to limit leverage, it suggests a pick-up in defaults. ![]() Put another way, nearly 40% of total outstanding corporate dollar bonds from China’s most troubled companies is due next year. There’s $8.6 billion of offshore bonds coming due next year that currently have at least 15% yields - classifying them as stressed, according to data compiled by Bloomberg. That’s because of a looming wall of dollar debt, issued by now-stressed borrowers, that comes to maturity. In 2020, it could be the offshore market’s turn. (Bloomberg) - A record pace of defaults hit China’s domestic bonds this year. ![]()
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