China Has More Distressed Corporate Debt Than All Other EMs
Comment of the Day

November 09 2018

Commentary by Eoin Treacy

China Has More Distressed Corporate Debt Than All Other EMs

This article by Selcuk Gokoluk for Bloomberg may be of interest to subscribers. Here is a section:

China’s debt, both distressed and otherwise, account for a quarter of all securities included in the gauge, which tracks about 660 dollar notes with a par value of at least $500 million. The Asian nation is home to the developing world’s biggest bond market.

The jump in China’s distressed bonds helped fuel an increase in borrowing costs for emerging-market companies to the highest level in more than two years. The impact of the trade war on the Asian nation has compounded pressure on developing assets, already reeling under the strain of higher U.S. interest rates and Treasury yields.

 

Eoin Treacy's view

In markets with well-developed corporate bond markets we can come to some estimation of what to expect from the default rate. It’s going to be based on history and may or may not be accurate but at least there is some historical context. China is a country with no history of defaults because everyone always got bailed out.

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