China developers’ bonds, shares hit again by Evergrande contagion worries

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SHANGHAI, Oct 13 (Businesshala) – Shares and bonds in Chinese property companies fell further on Wednesday after China Evergrande Group missed its third round of interest payments on its dollar bonds in three weeks, and others warned of defaults.

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In a clear sign of global investors’ concerns about the yet spreading debt transition, options-adjusted spreads on the ICE BofA Asian Dollar High Yield Corporate China Issues Index rose to a new all-time high of 2,337 basis points as of Tuesday evening US time.

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On Wednesday morning, data from the Shanghai Stock Exchange showed that onshore bonds issued by developers Shanghai Shimao Co Ltd and Country Garden Properties Group were among the biggest losers of the day, falling between 1% and 4.2%.

A sub-index tracking A-shares of property firms fell 1.58%, compared to a 0.31% rise in the blue-chip CSI300 index.

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Markets in Hong Kong remained closed on Wednesday morning due to the storm that affected the city.

Evergrande did not pay nearly $150 million worth of coupons on three bonds due on Monday after two other missed payments in September. While the company hasn’t technically defaulted on payments that have a 30-day grace period, investors say they’re expecting a lengthy and drawn-out debt restructuring process.

The company’s main entity, Hengda Real Estate Group Co, faced a 121.8 million yuan onshore bond coupon payment on October 19, and Evergrande has another $14.25 million in bond coupons on October 30.

Debt pressure extends far beyond Evergrande. Chinese property developers have $555.88 million worth of high-yield dollar bond coupons this month, and nearly $1.6 billion before the end of the year, and Refinitiv data shows at least $92.3 billion worth of Chinese Shows property developers’ bonds maturing next year

Evergrande’s mid-sized rival Fantasia has also already missed payments and Modern Land and Cynic Holdings are trying to delay the payment deadline, which is still likely to be classified as a default by the main rating agencies. Is.

“These stories challenge the notion that Evergrande is one-of-a-kind,” analysts at Capital Economics wrote in a note.

He added that although China’s policymakers would be able to avoid a “doomsday scenario”, the excessive asset sector would continue to weigh on the world’s second-largest economy, he said.

“Even after systematic restructuring of the worst-affected developers with minimal transition to the financial system, construction activity will still almost inevitably slow down greatly.”

The IMF said on Tuesday that China has the ability to resolve Evergrande’s debt-related issues, but warned that an escalation of the situation could lead to widespread financial stress. (Reporting by Andrew Galbraith; Editing by Muralikumar Anantharaman)

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