Chinese bond rout passes from Evergrande to other big developers


(Bloomberg) – Investor worries are shifting to the strongest Chinese real estate companies as the massive sell-off in the sector’s dollar bonds turns to higher-quality borrowers.

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A dollar bond from China’s largest real estate company by sales, Country Garden Holdings Co., fell 2 cents to 77.4 cents on Monday morning after hitting a record 10.3 last week. China Vanke Co., the country’s second largest, also slipped. A dollar bill sold by one of its units was listed down to 96.2 cents after falling 3.2 cents last week, the biggest drop since March 2020.

The crackdown on excessive debt in the country’s real estate sector and the debt crisis of Asia’s largest junk bond issuer, China Evergrande Group, has left investors to focus almost entirely on the worst developers. noted until recent days. But as concerns grow about the impact on the wider economy, pressure has spread to the nation’s largest real estate companies.

Lombard Odier’s Asian credit director Dhiraj Bajaj said last week that there is a risk of systemic default in the real estate sector.

Non-payments have so far been limited to small businesses which pose a lower risk to financial markets. But fears of rising stress at Kaisa Group Holdings Ltd., China’s third largest borrower of dollar debt among developers, have rekindled concerns that the credit crunch that started with Evergrande is getting harder and harder. to contain.

With contagion risks now affecting China’s largest and highest-rated real estate companies, some investors see better value in weaker companies that offer the potential for greater rewards.

Even though overall prices remain at troubled levels, some bonds sold by weaker Chinese real estate companies have rebounded. The 13% one-unit Evergrande note due 2022 that had a coupon due on Saturday is listed at 22.5 after rising 4.7 cents in the previous two weeks. The obligation of Yango Justice International Ltd. due 2022 is 25.4 cents after climbing about 3.7 cents through the end of last week.

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