blog

Latest from the Quantamize Blog

Are Chinese Companies in Credit Trouble with the Trade War End in Sight?

Feb 13, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions

 

  • Increasingly positive sentiment pertaining to developments in the US-Sino trade war has buoyed Chinese and Hong Kong stocks higher to start 2019 with the Hang Seng Index up 9.00% YTD and the Hang Seng China Enterprises Index up 9.09% YTD, as of yesterday’s close. Worries, however, are beginning to mount over the credit health of Chinese companies.
     
  • China’s National Development and Reform Commission, who is responsible for overseeing bond issuances by the country’s largest state-owned enterprises and some large property companies, recently launched a country-wide inspection to assess credit risks of Chinese companies, according to a South China Morning Post report on Wednesday.
     
  • According to the report, the country-wide campaign comes as more Chinese companies are running into trouble repaying debt obligations.
     
  • So far in 2019, 15 bonds owned by Chinese companies, worth a combined 10.6bn yuan, have defaulted, according to Bohai Securities analyst Li Yuanwei. Yuanwei believes that more defaults could be in the pipeline, writing in a note to clients, “Economic growth is still under pressure, while companies are facing difficulties in refinancing debt with banks tightening their belts for risk control.” 
     
  • In 2018, 119 Chinese corporate-owned bonds defaulted, more than triple the 35 Chinese corporate-owned bond defaults a year prior. The value of bond defaults in 2018 amounted to 116.6bn yuan (USD$16.95mm), also more than triple the worth of 2017 bond defaults of 33.7bn yuan.
     
  • In late January, CIMG, one of China’s largest investment conglomerates, missed a payment on its bond worth 3bn yuan and has since suspended bids for 3 other bonds in the last week.

 

Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS
Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS