Real Estate news Dorota Dyman and Associates, China's bond investors wising up to price of credit risk - 2 views

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  #1 ginjovanniwozhi on 19 Feb 14

   

  Having traded for years almost oblivious to the notion of risk, China's bond market, Asia's biggest outside Japan, has begun exhibiting characteristics of a genuine credit culture, with onshore investors demanding higher premiums for weak borrowers.
  
  In the past, investors had operated under the belief that the state would always step in to prevent a default.
  
  But a recent default of a credit product, and growing worries over the proliferation of a shadow banking system extending off balance sheet loans, has made them question old assumptions.
  
  Hence, lenders have begun differentiating on the basis of industry fundamentals, the degree of state support and balance sheet size, making the credit curves steeper as the gap between the strong and weak names widens.
  
  "There is no dearth of potential defaulters. But, when there is confidence of a bailout there is no fire sale even in the stressed names, because of confidence that principal will be repaid despite missed coupons," said Becky Liu, Standard Chartered strategist based in Hong Kong.
  
  "The situation is starting to change."
  
  In January, AAA-rated Beijing State Owned Asset sold bonds carrying a coupon of 6.48 percent, 242 basis points more than a coupon paid by AA-rated Ningxia Baota Petrochemical.
  
  Similar bonds sold in December showed a narrower gap between top-tier and second-tier issuers.
  
  Shaanxi Coal, rated AAA, sold 2018 bonds at a coupon of 6.48 percent, but AA-rated Anhui Foreign Economic Construction had to pay just an extra 132 bps for its 5-year bonds.
  
  But while the trends are positive, the situation really is only starting to change, as analysts say most investors still nurture belief that Beijing will step in rather than allow a default that could drain confidence from the market.
  
  read more:
  http://www.reuters.com/article/2014/02/16/bonds-china-risk-idUSL3N0LI11C20140216
  
  more related article:
  http://www.buzznet.com/groups/dorotadymanassociatesrealestate/
  http://www.slideshare.net/karczmarek/dorota-dyman-associates-real-estate

   

  <div class="cArrow"> </div><div class="cContentInner">Having traded for years almost oblivious to the notion of risk, China's bond market, Asia's biggest outside Japan, has begun exhibiting characteristics of a genuine credit culture, with onshore investors demanding higher premiums for weak borrowers. <br /> <br /> In the past, investors had operated under the belief that the state would always step in to prevent a default. <br /> <br /> But a recent default of a credit product, and growing worries over the proliferation of a shadow banking system extending off balance sheet loans, has made them question old assumptions. <br /> <br /> Hence, lenders have begun differentiating on the basis of industry fundamentals, the degree of state support and balance sheet size, making the credit curves steeper as the gap between the strong and weak names widens. <br /> <br /> "There is no dearth of potential defaulters. But, when there is confidence of a bailout there is no fire sale even in the stressed names, because of confidence that principal will be repaid despite missed coupons," said Becky Liu, Standard Chartered strategist based in Hong Kong. <br /> <br /> "The situation is starting to change." <br /> <br /> In January, AAA-rated Beijing State Owned Asset sold bonds carrying a coupon of 6.48 percent, 242 basis points more than a coupon paid by AA-rated Ningxia Baota Petrochemical. <br /> <br /> Similar bonds sold in December showed a narrower gap between top-tier and second-tier issuers. <br /> <br /> Shaanxi Coal, rated AAA, sold 2018 bonds at a coupon of 6.48 percent, but AA-rated Anhui Foreign Economic Construction had to pay just an extra 132 bps for its 5-year bonds. <br /> <br /> But while the trends are positive, the situation really is only starting to change, as analysts say most investors still nurture belief that Beijing will step in rather than allow a default that could drain confidence from the market. <br /> <br /> read more: <br /> <a href="http://www.reuters.com/article/2014/02/16/bonds-china-risk-idUSL3N0LI11C20140216" target="_blank" rel="nofollow">http://www.reuters.com/article/2014/02/16/bonds-china-risk-idUSL3N0LI11C20140216</a> <br /> <br /> more related article: <br /> <a href="http://www.buzznet.com/groups/dorotadymanassociatesrealestate/" target="_blank" rel="nofollow">http://www.buzznet.com/groups/dorotadymanassociatesrealestate/</a> <br /> <a href="http://www.slideshare.net/karczmarek/dorota-dyman-associates-real-estate" target="_blank" rel="nofollow">http://www.slideshare.net/karczmarek/dorota-dyman-associates-real-estate</a></div>

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