Market watchers untroubled by China bond defaults
Sinosteel postponed its interest payment on a 2 billion yuan bond
China market watchers are sanguine about the latest wave of bond defaults that started in the offshore market and have now spread to the domestic market.
Indeed, they say too few defaults were allowed to go through previously and the new wave is good for the system.
Defaults in the onshore bond market have only just begun in earnest, 34 years after the its reopening , with last week’s default on interest payments by central government-controlled Sinosteel attracting widespread interest.
Sinosteel last week postponed its interest payment on a 2 billion yuan (HK$2.43 billion) bond that fell due on Tuesday. The National Development and Reform Commission intervened on Monday to delay redemption of principal by a month to November.
A trickle of defaults in the offshore market, following one by property developer Kaisa earlier in the year, has seen new issuance stunted.
“We have seen investors come out of such deals with very little returns,” said Nigel Pridmore, a partner at law firm Ashurst. “The market for those companies really hasn’t been there, since Kaisa fell through. They [high-yield issuers] have not been able to get to market. Investors are nervy and just want to see what happens to Kaisa.”