Chinese property companies’ bonds continued to fall on Wednesday, comprising seven of the top 10 losers among Shanghai-traded corporate bonds.
Bonds issued by developers including Shanghai Shimao, China Aoyuan Group and Country Garden Properties Group fell between 1.6 per cent and 7.4 per cent, according to exchange data.
Dollar bonds also fell, although traders said limited market liquidity following earlier routs meant prices were only indicative, with tradeable prices possibly 10-20 points lower than screen prices.
Marketaxess quoted a Kaisa Group Holdings June 2026 bond as falling 0.9 per cent to 41.125 cents. Its yield has risen to around 40 per cent.
In equity markets, a sub-index tracking A-shares of property firms fell 0.7 per cent against a 1.2 per cent rise in the blue-chip CSI300 index.
Markets in Hong Kong were closed on Wednesday due to a typhoon affecting the city.
WALL OF DEBT
Evergrande’s main unit, Hengda Real Estate Group Co, faces a 121.8 million yuan onshore bond coupon payment on Oct 19 and Evergrande has another US$14.25 million dollar bond coupon due on Oct 30.
Debt pressures extend far beyond Evergrande. Chinese property developers have US$555.88 million worth of high-yield dollar bond coupons due this month, and nearly US$1.6 billion due before year-end, and Refinitiv data shows at least US$92.3 billion worth of property developers’ bonds maturing next year
Evergrande’s mid-sized rival Fantasia has also already missed a payment and Modern Land and Sinic Holdings are trying to delay payment deadlines that would still most likely be classed as a default by the main rating agencies.
“These stories have challenged the notion that Evergrande is one of a kind,” analysts at Capital Economics wrote in a note.
While China’s policymakers will likely be able to avoid a “doomsday scenario”, the overextended property sector will continue to weigh on the world’s second-largest economy, they said.
“Even following an orderly restructuring of the worst-affected developers with minimal contagion to the financial system, construction activity would still almost inevitably slow much further.”
The IMF said on Tuesday that China has the ability to address the issues linked to Evergrande’s indebtedness, but warned that an escalation of the situation could lead to the emergence of broader financial stress.
The US$5 trillion Chinese property sector, accounts for around a quarter of the Chinese economy by some metrics and is often a major factor in Beijing policymaking.
Source: Channel News Asia