An analyst stated Tuesday that investors could expect more Chinese property developers defaulting on their bond payments. However, problems in the realty sector have not spread to other industries. Evergrande and other Chinese developers have struggled to pay their debts, causing financial distress in China. Evergrande appears to have avoided default, after apparently remitting funds last week for interest payments. "Most likely, we will see more defaults...of these developers," Bo Zhuang (senior analyst at investment firm Loomis Yales) told CNBC's "Street Signs Asia" that it was "most likely" that there would be more.
Analyst said that the rise in bond defaults should be gradual and that the Chinese authorities would marginally relax some of the policy measures that have been weighing down the real-estate sector. He said that the decline in housing sales in China has stopped in the past two weeks, which is a "good sign." He said that this has made some developers' valuations "appealing" for investors.
The future of China's real estate sector
A large part of the Asian high yield bond market is made up by Chinese property developers. After years of borrowing excessively, these firms have seen rapid growth. Chinese authorities have intensified efforts to curb excesses in this sector. They have tightened mortgage lending rules and limited developer borrowing. All these high-yield Chinese property name have been on a rollercoaster ride from a market perspective. Zhuang said that the Chinese companies that have issued bonds seem to be doing well compared to the non-property name names.
