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China defaults set to worsen as US$8.6bil bonds due next year
HONG KONG: A record pace of defaults hit China’s domestic bonds this year. In 2020, it could be the offshore market’s turn.
That’s because of a looming wall of dollar debt, issued by now-stressed borrowers, that comes to maturity. There’s US$8.6bil of offshore bonds coming due next year that currently have at least 15% yields -- classifying them as stressed, according to data compiled by Bloomberg.
Put another way, nearly 40% of total outstanding corporate dollar bonds from China’s most troubled companies is due next year. With Chinese policy makers emphasising the need to continue a campaign to limit leverage, it suggests a pick-up in defaults. For those lured by juicy yields in today’s low-rate universe, that means danger.
“This is a market where you want to go for safer bets rather than be a hero, ” said Michel Lowy, chief executive officer at Hong Kong-based SC Lowy, which specializes in fixed income
“We are on the verge of a massive snowball effect, ” where defaults spur funds to take money out of high-yield debt, driving up yields and making it all the harder for firms to refinance, he said.
Lowy advises sticking with companies with strong cash flows.
Trouble is, a swathe of the borrowers with debt due next year lacked strong fundamentals, and took advantage of unusually sweet financing conditions back in 2017 -- the year of the synchronous global expansion. That’s according to Wonnie Chu, managing director of fixed income at GaoTeng Global Asset Management Ltd.
- Bloomberg
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
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China has USD12 trillion GDP
That is USD 12,000 bil
What is USD 8.6 bil ?
Stupid journalist
2019-09-27 13:54