Source: Wall Street Journal
Author: Frances Yoon
Looking back, it was just the dawn of illusory.
Earlier this year, the Asian garbage bond market had briefly vitality. A Chinese company issued $ 400 million bonds in January, and a second bond was sold one month later.The two transactions of Wanda brought hope to people, thinking that the once lively Asian junk bond market began to restore health.
Four months later, Wanda's rating was lowered by a large credit rating company. The company's recently issued bond value has shrunk by about half, and during the period, no other Chinese companies sold high -yield bonds.
"The situation is really bad," THU HA Chow, director of Robeco's fixed income in Asia, said when talking about the junk bond market issued by Chinese real estate developers."Think of the situation in the global financial crisis. At that time, it was not as chaotic at that time. At that time, there were two -way fluctuations, and now it feels like not looking back in a direction." Chinese real estate developers were the largest source of garbage bonds in Asia.
The scale of the issuance of Chinese companies in the Asian garbage bond market was the largest, but in the past two years, a series of breach of contract in Chinese real estate developers has caused investors to be huge losses.According to DEALOGIC data, the US dollar junk bonds issued by Chinese companies last year fell to $ 573 million, while in 2019, it exceeded $ 58 billion.
According to ICE BOFA data, in the past 24 months, the total return of these US dollar bonds has been negative for 18 months.At present, the average price of China's garbage bonds is about 55%of the face value.
In the past five years, most of Asian garbage bonds come from Chinese companies, many of them are real estate developers.According to ICE BOFA data, as of June 5, an index that measured the performance of garbage bonds in China was nearly 22.17%, close to the highest level since this year.
In November last year, the Chinese government adopted a number of measures to deal with real estate slowdown, including relaxation of restrictions on real estate debt and encouraging bank loans.This has brought a brief booster to the real estate market, but did not solve the problems facing real estate companies.
In March of this year, China Real Estate Corporate Ocean Group stated that it would postpone the interest of a permanent bond with a principal of $ 600 million.Its bonds once fell below 30%of the face value, but the Ocean Group finally expressed the payment of these tickets.In May, the developer Headquarters Headquarters Hejing Taifu Group said that a domestic bond was not paid on time to trigger a default of its US dollar bonds.
Wang Dongchen, manager of the fixed income investment portfolio of Ping An Asset Management (Hong Kong) Co., Ltd., said that the key to invest in junk bonds issued by Chinese real estate developers is to choose developers who can survive.He said that investors should not only go to the real estate inspection, but also understand the views of the financial status of developers and regulators that provide funds for local governments and developers.
But some investors said that the list of developers that may survive is narrowing in the case of continued turbulence in the Chinese real estate market.
Diwakar Vijayvergi, the investment manager of Lianbo, said investors now believe that some developers may be worse than expected.He said that investors who previously believed that the developers who could survive might not be able to survive.
The deterioration of China's economic prospects is increasing this pain.Economists and investors have previously predicted that the cancellation of dynamic clearance policies will bring a rapid rebound of Chinese economic activities.Earlier this year, there were indeed a short -term increase in expenditure, but the recent social consumer goods retail sales, industrial added value and fixed asset investment data have not met the expectations of economists.China's manufacturing activities have also declined.
When Wanda issued debt in January and February, investors are looking forward to a subsidiary of the company listed in Hong Kong to raise funds to help them repay their debts.However, this listing transaction has not been approved by the Chinese regulatory agency, and the regulatory agency requires the company to provide more details about how to manage its debt.
According to Fitch International rating, if Wanda cannot listed this subsidiary, it will be forced to return to the small shareholders to invest more than $ 5 billion before investing.Dalian Wanda Commercial Management Group Co., Ltd. did not respond to the request of comment.Financial consultants said in marketing materials that the company was the actual issuer of the previous two bonds.
Wanda's bonds have been rated by the well -owned international rating of the credit rating company and Moody's Investor Service Company.This means that these two rating companies believe that the possibility of breach of contracts in these bonds is now greater.The S & P global rating has lowered the rating of a subsidiary that provides a guarantee for these bonds.Wanda operates shopping malls in many places in China.
Developers with default in US dollar bonds have reached a debt restructuring agreement with overseas bond holders, including China Evergrande, which was once one of the world's largest real estate companies.However, these reorganizations of the raising of the junk bond market are not as good as investors.According to TraDeweb's data, Evergrande's USD bond transaction price expired in 2025 is about 6%of the face value.
Vijayvergia said: "Investors' confidence and weak confidence in the recovery of the industry, people think that even new capital structures may not be sustainable."
Some investors simply decide to wait and see.Brandywine Global Investment Management's fund manager Tracy Chen said she did not invest bonds sold by real estate developers this year, and she was still watching the recovery of the industry.
Some investors hope to take measures to promote the development of the real estate industry in relevant Chinese departments.This has begun at the local level: Qingdao City, Shandong Province announced last week that several measures to relax the real estate market policies.
Nomura analysts warn investors not to expect the Chinese government to introduce comprehensive support measures.These analysts predict that the Chinese government will adopt more scattered methods, which may help the market, but will not significantly reverse the situation.The analysts of Goldman Sachs have predicted that more loose policies will be introduced, but they say that the recovery of the real estate industry will be "slow and bumpy."
