China’s bond market has been eerily quiet lately. Over the past year, investors in China’s U.S. dollar bonds had gotten used to the idea of defaults, a Bloomberg View reported. As early as 2015, the government started allowing some state-owned enterprises to renege on their commitments, a painful but welcome step that helps differentiate healthy firms and troubled ones. But there hadn’t been a single case since China Minsheng Investment Group Corp. triggered a cross-default in April.
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A Chinese company has pulled out of the running to buy British Steel, dealing a blow to efforts to rescue the stricken manufacturer and safeguard thousands of jobs, the Financial Times reported. Jingye Group had submitted an offer for the whole of the UK’s second-largest steelmaker, which collapsed into insolvency two months ago after its request for a £30m state bailout was rejected, according to two people briefed on the matter. Based in China’s industrial heartland of Hebei province, Jingye also owns hotels and a medicines business alongside its main steelmaking operations.
Two months after China shocked investors with the first government seizure of a bank in two decades, market confidence in the nation’s smaller lenders has yet to fully recover, Bloomberg News reported. That may be just what the country needs. When it took control of Baoshang Bank Co. on May 24 and imposed losses on some creditors, China’s government upended the long-held assumption that it would always provide banks with a 100% backstop.
A cash crunch at one of China’s best known conglomerates is getting worse as the company said it will not be able to pay its upcoming dollar notes, Bloomberg News reported. China Minsheng Investment Group Corp.’s offshore unit said in a filing that it won’t be able to repay the principal, as well as the interest on the 3.8% $500 million bond due August, after considering its liquidity and performance. On Thursday, the property-to-financial conglomerate announced it only managed to repay part of the principal on a 6.5% 1.46 billion yuan note.
Loans to Venezuela from President Nicolas Maduro’s allies Russia and China would be renegotiated though the Paris Club if Maduro leaves power, an advisor to the opposition said on Wednesday, responding to concerns about favourable treatment for the two countries, Reuters reported. Ricardo Hausmann, who represents opposition leader Juan Guaido at the Inter-American Development Bank (IADB), said Guaido’s team has not determined how loans might be restructured under its governance because bilateral debt talks typically take place under the auspices of the Paris Club creditor group.
The wild ride in an Indonesia textile maker’s dollar bonds is putting a spotlight on the risks that Asia junk bond buyers are taking, Bloomberg News reported. Four months after a subsidiary of Indonesia’s Duniatex Group sold a $300 million bond, attracting over $1 billion of orders, that bond has plummeted, losing nearly 70 cents on the dollar this week. The stunning fall, prompted by a missed loan payment by another group subsidiary, has shocked bond investors.
Conditions in China’s credit market are helping to stoke startling growth in the nation’s pile of asset-backed securities, according to a top underwriter. Almost all types of bonds have been affected by the fallout from a surprise government takeover of a troubled lender in May, Bloomberg News reported. But banks are the main holders of China’s ABS and have better access to funding, largely preventing a sell-off in the sector, said Zuo Fei, general manager of the innovation financing department from China Merchants Securities Co.
China’s efforts to shore up sagging economic growth are leading to a resurgence in indebtedness, underlining the challenge President Xi Jinping’s government faces in curbing financial risk, Bloomberg News reported. The nation’s total stock of corporate, household and government debt now exceeds 303% of gross domestic product and makes up about 15% of all global debt, according to a report published by the Institute of International Finance. That’s up from just under 297% in the first quarter of 2018.
Risky borrowers are running into trouble in China and that is putting pressure on trust companies, an important corner of the country’s shadow-banking system, The Wall Street Journal reported. The fear is that this could further reduce the credit available for private businesses, acting as a drag on an economy whose growth is already slowing. Lightly regulated trust companies have been critical lenders for these firms, as traditional banks deal mostly with favored state-owned enterprises. These problems could also bounce back on many small investors.
Before being detained by police in Shanghai, Lo Ching was lauded as the new-age Hua Mulan, the legendary female Chinese warrior. Now the downfall of Lo, chairman of a Hong Kong-listed conglomerate, has become a parable of the dangers of investing in China, a Bloomberg View reported. Noah Holdings Ltd., one of China’s largest wealth managers catering to high-net-worth individuals, is among the first to find out. The U.S.-listed asset manager has filed a lawsuit against Camsing International Holding Ltd.