More Chinese companies could default on their debts issued in U.S. dollars, experts warn.
They say that the rising cost of borrowing and a weakening Chinese yuan could see more firms fail to meet upcoming payments, as an increasing number of bonds mature in the next few years.
Japanese bank Nomura said in a research note in early November that for the first 10 months of this year, defaults on Chinese offshore corporate dollar bonds — or OCDB — totaled $3.4 billion, compared with none last year. It expects more defaults to come over the next two years.
So far, there's little chance that increased pressure on offshore dollar repayment could trigger a broader crisis, but the situation should be closely monitored for spillover threats.
"I'm watchful over how these dollar debts will roll over in time," Tai Hui, chief market strategist for Asia Pacific at J.P. Morgan Asset Management in Hong Kong, told reporters Thursday.
Hui stressed that he currently sees no systemic risks, but noted that financial strains often begin in one area before spreading.
"I think the government needs to be very mindful of some of these potential links," he said, adding that the property sector should be foremost in mind.
picture: pixabay.com
Read more:
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.