Shares in Jiayuan International, a Chinese property developer, collapsed in late trading in Hong Kong on Thursday, underlining investors’ unease over a sector that is staggering under vast debts just as the world’s second-biggest economy slows. Analysts said that the stock, which closed down 81 per cent after a chaotic day’s trading that wiped more than $3bn from its market capitalisation, was engulfed by concern that Jiayuan would struggle to repay a $350m bond that was due this week.
A company that recorded one of China’s biggest corporate bond defaults is emerging as the most popular name among the nation’s stock traders in 2019, Bloomberg News reported. Wintime Energy Co., a coal miner based in China’s northern Shanxi province, has surged 60 percent this year to lead the benchmark CSI 300 Index. Its shares have rallied as investors wait for it to announce details on restructuring efforts, even as it said it sees uncertainty over repaying a 1 billion yuan ($148 million) bond due next week.
Chinese private companies may face an even more difficult ride in the domestic bond market in 2019 as billions of renminbi in maturing issuance conspire with reduced risk appetite, threatening an even bigger wave of defaults, the Financial Times reported. Last year’s Rmb151bn ($22.3bn) in defaults made it a banner year for credit events in the domestic corporate bond market.
Two weeks into 2019, five Chinese companies are already likely to default on 3.5 billion yuan (US$446.25 million) worth of debt, after a record US$17 billion default wave took the country by storm in 2018 amid a worsening economic slowdown and soaring refinancing costs facing the cash-starved private sector, the South China Morning Post reported.
John Authers wrote earlier this week about how China will help set the course of U.S. stocks for a while. The unfortunate catch is that China’s economy is clearly in trouble, a Bloomberg View reported. Wall Street seems to hang much of that on President Donald Trump’s trade war, which certainly doesn’t help. But there are disturbing signs China’s problems have deep roots, Noah Smith writes. Ever since the financial crisis, he notes, China’s productivity has been weak. This, along with flagging population growth, is a toxic economic combo.
China’s smaller banks, among the hardest hit by President Xi Jinping’s crackdown on risky financing, are set for a tougher 2019 as authorities force them to shut business lines that once powered profit growth, Bloomberg News reported. Authorities have ordered the nation’s provincial lenders to limit business to the region they’re based in, or wind down by the end of this year, and have said that some banks expand “blindly.” The new rules will contribute to lower profits at the small banks, which are already overvalued when compared with bigger rivals, according to analysts.
China’s surprisingly weak trade data brought a four-day rally in European shares to a halt on Monday, with luxury goods and technology stocks leading the drop as investors fretted about slowing global growth and weaker-than-expected earnings, The Irish Times reported. Trading volumes fell below average on the Irish market on Monday with the Iseq overall index dipping 0.54 per cent. The smaller Iseq 20 index was led lower by Swiss-Irish baking group Aryzta which dropped 8.4 per cent to €1.05. Traders noted the stock has been quite volatile of late, moving between 95c and €1.15.
UBS Asset Management has turned bullish on beaten down Asia junk dollar bonds and expects investors to buy more on borrowed money due to the appeal of higher yields, Bloomberg News reported. The firm is positive on such securities from Chinese property companies in particular, its key overweight globally within high yield. The money manager expects China’s stimulus measures to help borrowers gain access to funding onshore, reducing offshore bond sales. Despite a recent rally in Asia junk securities, yields are still near the highest since 2012, according to a Bloomberg Barclays Index.
China’s banks’ urgent want for cash is threatening to overload the country’s fledgling convertible-bond market. Four lenders are due to sell as much as 146 billion yuan ($22 billion) of the hybrid securities by the end of June after the regulator approved the deals in recent weeks, Bloomberg News reported. That includes what could be the largest such offering China’s domestic market has ever seen: Bank of Communications Co.’s 60 billion yuan issue. The fundraising total would be twice the amount raised in all of 2018, data compiled by Bloomberg show.
Staff at struggling dockless bike-sharing start-up Ofo’s international subsidiaries are “prepared for bankruptcy or acquisition” after the company shut its overseas department, the Financial Times reported. A person familiar with the company said that Beijing-headquartered Ofo’s international arm, which managed the global subsidiaries, had closed this week but employees abroad still had their jobs. The division’s closure was first reported by local Chinese media.