The Strategist

Investors in Chinese bonds lose nearly $130B

08/25/2022 - 09:44

The Financial Times and Bloomberg estimate that investors who purchased dollar bonds from Chinese developers lost $130 billion. About two-thirds of the issued bonds have lost 30% of their value to date as a result of the second year of a real estate market crisis in China.
It is now evident that values for many bonds (issued by Chinese developers) have dropped since last year due to unfavorable market conditions and poor news backdrop, according to FT senior credit analyst Cedric Lai: “We anticipate more loan defaults this year, particularly for developers who have significant foreign currency debt repayment obligations and sluggish property sales.”

A number of Chinese developers' dollar bonds are currently quoted at prices that are quite near to default. For instance, the current quote for the large real estate developer Kaisa Group's bonds that mature on September 7 is $0.09 for every $1 of face value, which may result in a $272 million loss for investors on bonds worth $300 million.

Shimao, a Shanghai developer, has bonds that are currently quoted at $0.1 for every $1 face value, which could result in a $268 million loss for investors.