WRAPUP 3-China’s bond markets slump again as new Evergrande deadline passes

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(Adds citation, details about CST, WSJ story)

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* Evergrande appears to have missed the third round of bond payments

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* Some offshore bondholders have not been paid – source

* Modern Land asks investors to push back bond payments

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* Cynic warns it’s likely to default next week

SHANGHAI/LONDON, Oct 11 (Businesshala) – Bonds of Chinese property firms were hit by another wrecking ball on Monday as Evergrande was set to miss its third round of bond payments in as many weeks and rivals Modern Land and Cynic were the latest leg. Were hitting the delay deadline.

High-yield Chinese bond markets were once again routed as fears about a rapidly spreading infection in the $5 trillion region, which drives a large part of the Chinese economy, continued to fuel sentiment.

Meanwhile, the Wall Street Journal reported Here Chinese President Xi Jinping is launching an inspection of financial institutions to see whether private companies like Evergrande were too close to state-owned banks, investment firms and financial regulators. The WSJ reported that major lenders to Evergrande include financial group Citic, which is being investigated. Citic was not immediately available for comment.

Weary investors had little hope that Evergrande would abruptly stop a $150 million coupon payment on Monday, but the fact remains that bondholders said they’ve got nothing this time around to either fully default. Expectations have been strengthened.

“The key for offshore holders is the next few weeks and whether there will be any payment or communication coming in regarding the company’s previously missed offshore coupons,” wrote Craig Erlam, senior market analyst for the UK and EMEA at forex trading firm OANDA. www.oanda.com/us-en In a research note on Monday.

Erlam wrote that it is “highly unlikely” Evergrande will pay off “given how the last two deadlines have gone”.

A spokesperson for Evergrande did not immediately respond to a request for comment.

Once China’s largest developer firm with more than $300 billion in liabilities, it is now at risk.

The cash-strapped property developer’s troubles and contagion concerns have sent shock waves to global markets and the firm has already missed payments on dollar bonds, worth a combined $131 million, due on September 23 and It was due on 29 September.

CST GROUP LIMITED, an investment holding company Here, said in a statement Here On Monday, it sold 10.5% China Evergrande Notes and 11.5% China Evergrande Notes for $815,000 and $702,000.

Other signs of tension include smaller developer Modern Land asking investors to push back by three months a $250 million bond payment due on October 25 to “avoid any potential payment default”.

Cynic Holdings said it was also likely to default next week because it did not have enough financial resources to make its remaining bond payments this year. That’s one early next week, though that bond was already down 75%.

Modern Land’s April 2023 bond fell more than 25% to 32.25 cents with a coupon of 9.8%, according to financial data provider Duration Finance, while the company’s shares have lost a third of their value in the past month.

Cassa Group, which was the first Chinese property developer to default in 2015, also saw some of its bonds fall to less than half their face value. R&F Properties and Greenland Holdings, which have prestige projects in global cities such as London, New York and Sydney, were also widely sold.

“It’s a disastrous day,” said Clarence Tam, fixed income portfolio manager at Avenue Asset Management in Hong Kong, highlighting how some of the safer “investment grade” firms have now eroded 20% of their bonds.

“We think this is driven by global fund outflows…. You can stop depositing money.

Analysts at JP Morgan also highlighted how international investors are now demanding the highest premium ever to buy or hold ‘junk’ rated Chinese debt.

There is now a 1,200 basis point difference between the bank’s JCI China High Yield Index and a similar index of investment grade AA-rated local Chinese market bonds, known as “onshore” bonds.

“Evergrande’s infection risk is now spreading to other issuers and regions,” said analysts at JPMorgan.

Another London-based analyst, who did not wish to be named, said: “Slowly and gradually we are seeing the rest of the Chinese property sector falling apart”.

unstable foundation

In equity markets, the Hang Seng property and construction sub-index fell 0.4% against a rise of nearly 2% in the broader index.

Fantasia Group China Co., whose controlling shareholder is Fantasia Holdings, said on Monday it would adjust the trading mechanism of its Shanghai-traded bonds following a credit downgrade by the China Chengxin International Credit Rating Company (CCXI).

Fantasia appointed advisors on Friday after it stunned the markets by missing a bond payment earlier in the week. It saw its bonds drop from about 100 cents on the dollar to just 20 cents after it said just weeks ago that its liquidity was fine.

Kenneth Ho, Head of Asia Credit Strategy at Goldman Sachs, said: “We believe policymakers have zero tolerance for systemic risk and aim to maintain a stable asset market, and if asset activity levels decline. If it gets worse, policy support may be forthcoming.” .

“That said, we also believe that policymakers do not want to over-stimulus, and their long-term goal is to decontaminate the asset sector.”

Harbin, the capital of northeastern Heilongjiang province, has become one of the first cities in China to announce measures to support property developers and their projects that have been rocked by the Evergrande crisis.

Advisors to offshore bondholders said Friday they have yet to hear from Evergrande, and are also seeking more information about their plans to divest some businesses, saying a potential fire-sale could ultimately leave them short. .

Trading in shares of Evergrande, as well as its Evergrande Property Services Group unit, has been halted since October 4, pending the announcement of a major deal.

Additional reporting by Xiao Han and Claire Jim and Megan Davis and Editing by Niket Nishant by Mark Potter


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