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

Modern Land (China)

13/10/2021 05:13

SHANGHAI, Oct 13 (Reuters) - Shares and bonds of Chinese
property companies fell further on Wednesday after China
Evergrande Group  3333.HK  missed a third round of interest
payments on its dollar bonds in three weeks, and as others
warned of defaults.
    In the clearest sign yet of global investors' worries of
spreading debt contagion, the option-adjusted spread on the ICE
BofA Asian Dollar High Yield Corporate China Issuers Index
 .MERACYC  surged to a fresh all-time high of 2,337 basis points
on Tuesday evening U.S. time.
    On Wednesday morning, Shanghai Stock Exchange data showed
onshore bonds issued by developers Shanghai Shimao Co Ltd
 600823.SS  and Country Garden Properties Group were among the
biggest losers on the day, falling between 1% and 4.2%.
    A sub-index tracking A-shares of property firms  .CSI000952 
fell 1.58% against a 0.31% rise in the blue-chip CSI300 index
 .CSI300 .
    Markets in Hong Kong were closed on Wednesday morning due to
a typhoon affecting the city.  urn:newsml:reuters.com:*:nL1N2R900P
    Evergrande did not pay nearly $150 million worth of coupons
on three bonds due on Monday, following two other missed
payments in September. While the company has not technically
defaulted on those payments, which have 30-day grace periods,
investors say they are expecting a long and drawn-out debt
restructuring process.  urn:newsml:reuters.com:*:nL1N2R80H9
    The company'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 $14.25 million dollar bond coupon due on
Oct. 30.  urn:newsml:reuters.com:*:nL8N2QP1H5
    Debt pressures extend far beyond Evergrande. Chinese
property developers have $555.88 million worth of high-yield
dollar bond coupons due this month, and nearly $1.6 billion due
before year-end, and Refinitiv data shows at least $92.3 billion
worth of Chinese property developers' bonds maturing next
year urn:newsml:reuters.com:*:nL1N2R80FT
    Evergrande's mid-sized rival Fantasia  1777.HK  has also
already missed a payment and Modern Land  1107.HK  and Sinic
Holdings  2103.HK  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.  urn:newsml:reuters.com:*:nL1N2R80WR

 (Reporting by Andrew Galbraith; Editing by Muralikumar
Anantharaman)
 ((Andrew.Galbraith@tr.com; +86 21 2083 0079; Reuters Messaging:
andrew.galbraith.thomsonreuters.com@reuters.net ; Twitter: https://twitter.com/apgalbraith))