The AF China Bond 50 Index is indicating that China’s financial industry is standing strong amid the threat of systemic contagion from Evergrande and broader property industry indebtedness. That’s despite a series of coupon payment misses by Evergrande as it stumbles from deadline to deadline, and despite defaults by companies including Fantasia, Modern Land and Sinic during the past month.
While China Bond 50 contains no property industry companies, the yellow line in the chart shows that its Construction industry subindex has also been steady for the past month after an earlier stumble.
There is likely more turbulence ahead though. Evergrande’s humongous liabilities include about $20 billion in outstanding dollar bonds. Goldman’s Ho says $6.1 billion of high-yield property bonds will mature in January, and adds that unless market conditions improve “refinancing may be challenging for many of the issuers.’’