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Chinese real estate bonds fall again

The Asian junk bond market suffered from another wave of selling Thursday, pushing the prices of many Chinese developer bonds even harder.

The price of US dollar bonds at many Chinese real estate companies has fallen by about 5 points, according to some market participants. Some have fallen further as many defaults and fears of further price declines have led many investors to sell their holdings.

Among the worst blows was Kaisa Group Holdings’ bonds. Ltd

1638 -7.54%

, A home developer who previously defaulted on external debt in 2015. The company’s Hong Kong-listed stocks fell 7.5% on Thursday, despite widespread recovery in the city’s stock market.

The 9.375% coupon Kaisa bond, which matures in 2024, was bid for just 55 cents in dollars Thursday afternoon in Asia, dropping about 20 points this week.

7.95% Bonds from Sunac China Holdings Ltd

1918 2.14%

Another developer investor has recently been worried, but after a recent sharp drop, it was bid for 72.5 cents in dollars on Thursday.

Asian junk bond investors were shocked early in the week by an unexpected dollar bond default by the Fantasia Holdings Group Ltd

1777 1.82%

A high-end developer who previously showed that it would pay off its mature $ 206 million debt on October 4.

September sales from multiple developers also fell sharply from August as demand from Chinese homebuyers declined.

“Monday’s fantasia default has exacerbated risk-off sentiment,” said Cheong Yin Chin, senior analyst for a Chinese company at debt research firm CreditSights.Missed dollar bond payments from industry leader China Ever Grande Group,

EGRNF 0.03%

Weeks of silence on this issue have also contributed to investor pessimism.

Chung said selling could continue, and extreme market reactions were “investor fears of not knowing how China would treat Evergrande and an increase in developers who could default. Are mixed. “

On Wednesday a day ago, the ICE BofA index on Chinese high yield dollar bonds yielded over 18%. This is the best in almost 10 years.

Some market participants said that while mainland China is in the midst of a week-long holiday starting October 1, bond prices have fallen sharply due to low trading volumes.

Andrew Dewar, Investment Manager Focusing on Asian Credit at GAM Investments, said:

“Brokers are trying to find a floor by lowering prices until someone gets a nibble,” he added.

Uday Patnaik, Head of Emerging Markets Bonds at Legal & General Investment Management, said he sold almost all high-yielding Chinese real estate bonds from his company’s absolute return fund.

“I don’t think the Chinese are dealing with this situation right now,” he said. “It started with an evergrande problem that wasn’t properly ring-fenced, and now it’s a sector-wide problem,” he added.

Patnaik said the distress of the real estate sector will continue to affect consumer confidence in China and other parts of the economy unless Beijing intervenes to stop the decline.

Write to Serena Ng (serena.ng@wsj.com) and Anna Hirtenstein (anna.hirtenstein@wsj.com)

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Chinese real estate bonds fall again

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