HONG KONG- China’s property sector debt turmoil is set to keep a lid on Asian high-yield corporate bond deals in the first half of next year after a string of defaults by real estate firms left global investors licking their wounds, bankers said.
Chinese property developers account for the biggest portion of high-yield, also known as junk bonds, deals in the region.
Volume of such issues has been badly dented by concerns over the financial health of Chinese developers, with issuance of high-yield corporate bonds in the Asia-Pacific region falling in 2021 to its lowest in three years.
China Evergrande Group and Kaisa Group both missed bond payments this year.
The failure to make payments, followed by a string of credit rating downgrades of indebted developers, has roiled China’s high-yield debt, sparked outflows and made asset managers jittery about issuers in the region.
Across the Asia-Pacific region, there was $50.4 billion worth of high-yield corporate bonds issued this year, the lowest since 2018 compared to $63.9 billion in 2020, according to Refinitiv figures. In higher grades of credit across the region, a strong start to the year means volumes will be higher for 2021 compared to the year prior.
China accounted for most of the regional decline, as investors began to close their books early to avoid the contagion and fallout from the property sector sell-off over the past quarter.
