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China Property Crisis to Boost Corporate Defaults: JPMorgan

JPMorgan has raised its emerging markets corporate high-yield default forecast to 10.7% for 2022, and said on Thursday Chinese developers’ default rate could be near 40%.


JPMorgan has predicted a high level of defaults in China and Russia in 2023.
JPMorgan said Chinese developers defaulted on their entire bond stock even after extending short-term debt maturities. File photo: Reuters.

 

Continued deterioration in the China property sector is likely to lift corporate default rates to above 10% for the first time since the 2008 global financial crisis, according to JPMorgan.

In a note on Thursday, the US investment bank said the Chinese developers’ default rate could be near 40%.

The bank raised its emerging markets corporate high-yield default forecast to 10.7% from 8.5% for 2022, the second hike in a year.

“Notably, the main contributor is unsurprisingly the China property segment, where the default rate is expected to reach close to 40% this year,” Alisa Meyers, an emerging market corporate strategist at JPMorgan in Hoboken, New Jersey, said.

Lockdowns in Chinese cities in response to the Covid-19 pandemic reduced property sector liquidity. There have been so far 24 defaults or distressed exchanges in China for $41 billion.

The bank said that Chinese developers defaulted on their entire bond stock even after extending short-term debt maturities.

“Despite all the chatter about government support, we have only seen some tangible backings to China property demand,” the report added.

The rate would also be affected by the hit on Russian companies from “sanctions and/or technical default” due to the war on Ukraine.

Most Russian banks that issued eurobonds failed to make payments since March “due to restrictions introduced against these banks in the US and elsewhere globally”.

 

  • Reuters, with additional editing by George Russell

 

 

READ MORE:

Goldman, JPMorgan Offer Their Top Southeast Asia Picks – CNBC

Russia, China Woes Risk Worst Default Wave Since 2009 – JPMorgan

Dimon Apologises For Saying JPMorgan Will Outlast China’s Communists

 

George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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