HONG KONG, Oct 12 (Reuters) – China Evergrande Group (3333.HK) on Tuesday missed its third round of bond payments in three weeks, intensifying market fears over contagion involving other property developers as a wall of debt payment obligations come due in the near-term.
Some bondholders said they did not receive coupon payments totalling $148 million on Evergrande’s April 2022, April 2023 and April 2024 notes due by 0400 GMT on Tuesday, following two other payments it missed in September.
That puts investors at risk of large losses at the end of 30-day grace periods as the developer wrestles with more than $300 billion in liabilities. read more
Evergrande did not immediately respond to a request for comment.
A total of $92.3 billion bonds issued by Chinese developers will be due in the next year, Refinitiv data show.
“We see more defaults ahead if the liquidity problem does not improve markedly,” said brokerage CGS-CIMB in a note, adding developers with weaker credit rating are having difficulty in refinancing at the moment.
Trading of high-yield bonds remained soft on Tuesday following a rout in the previous session on fears about fast-spreading contagion in the $5 trillion sector, which accounts for a quarter of the Chinese economy and often is a major factor in policymaking.
Shanghai Stock Exchange data showed the top five losers among exchange-traded bonds in morning deals were all issued by property firms.
Modern Land’s dollar bond due 2023 plunged 25% to 32.250 cents on the dollar, while Sinic’s bond due 2022 rose 12% to 19.35 cents, yielding over 1380%.
Modern Land, whose shares dropped over 3% to new low on Tuesday, had requested bondholders on Monday to delay a repayment due later this month for three months, while Sinic said it would likely default next week.
Aoyuan’s bond due 2025 declined 3.5% while Sunac’s bond due 2024 lost 2.6%.
On Monday, Fantasia Holdings’ (1777.HK) unit limited trading in its Shanghai bonds, which is often done ahead of defaults.
While global attention has been focused on missed dollar debt payments by Chinese property issuers, market indicators suggested that worries about contagion and a slowing economy are spreading further.
Market players say the sell-off, however, appears limited to more riskier bond names.
“The market is trading more rationally now, according to different quality and rating of the companies, rather than selling off on the whole sector,” said Michael Wong, director at CP Securities based in Hong Kong.
The cost of insuring against a China sovereign default continued to rise on Tuesday, with 5-year credit default swaps – which investors typically use as a hedge against rising risk – hitting its highest point since April 2020.
The option-adjusted spread on the ICE BofA Asian Dollar High Yield Corporate China Issuers Index (.MERACYC) pulled back to…