A chemical producer, chicken processor, a sausage maker, a tin smelter and a coal miner have something in common. Surging losses and high leverage have prompted brokerages to put red flags on their debt.
China International Capital Corp., Guotai Junan Securities Co. and Haitong Securities Co. all flagged the five companies’ liquidity risks this month after China Shanshui Cement Group Co. became at least the sixth firm to default in the onshore bond market on Nov. 12. Corporate notes are suffering, with the yield premium for five-year AA- rated debentures over the sovereign widening 20.6 basis points this month, the most this year.
“One of the triggers for a financial crisis in China would be high-profile corporate defaults, which could change a deep-rooted mindset among investors that the government would always stand behind troubled companies,” said Xia Le, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA. “Then a panic would follow.”
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China International Capital Corp., Guotai Junan Securities Co. and Haitong Securities Co. all flagged the five companies’ liquidity risks this month after China Shanshui Cement Group Co. became at least the sixth firm to default in the onshore bond market on Nov. 12. Corporate notes are suffering, with the yield premium for five-year AA- rated debentures over the sovereign widening 20.6 basis points this month, the most this year.
“One of the triggers for a financial crisis in China would be high-profile corporate defaults, which could change a deep-rooted mindset among investors that the government would always stand behind troubled companies,” said Xia Le, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA. “Then a panic would follow.”
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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