The bonds of 11 Chinese companies now yield more than 15 percent as investors brace for the nation’s second onshore default amid record maturities in the coming quarter.
Companies in Asia’s largest economy need to repay 1.5 trillion yuan (US$242 billion) of local currency notes in the period to June 30, the most for a quarter in Bloomberg data going back to 1998. The yield on Cloud Live Technology Group Co’s (中科雲網科技集團) 2017 debt jumped 157 basis points to 17.9 percent since the Beijing-based Internet company said on March 4 its ability to meet debt obligations next month face “big uncertainties.”
Political, economic and regulatory factors are converging to make defaults more likely. Chinese Premier Li Keqiang (李克強) told parliament this month he is prepared to tolerate individual cases of “financial risk,” growth is the slowest in more than two decades, an anti-graft campaign is halting projects and authorities are limiting investors’ scope to buy riskier bonds.
“Conditions for a second bond default are becoming more ripe,” said Li Ning, a bond analyst in Shanghai at Haitong Securities Co (海通證券). “Given the huge amount of redemptions, China’s bond market has a high credit risk in the second quarter.”
Investors did not lose a cent in China’s only onshore bond default to date. Shanghai Chaori Solar Energy Science & Technology Co (超日太陽能), which failed to make a full coupon payment in March last year, repaid all the principal and interest for its 1 billion yuan of bonds on Dec. 22.
“The economic slowdown has put pressure on Chinese companies, especially non-state-owned companies, which get less support from the government,” said Liu Dongliang (劉棟樑), a senior analyst at China Merchants Bank Co (招商銀行) in Shanghai. The “probability of a second default is rising.”
Cloud Live, which last year changed its business focus from restaurant chains to Internet data, said on March 4 investors had applied to sell back 398.71 million yuan of its bonds on April 5. The company had 10.39 million yuan in a special account for the repayment as of today, the bond’s lead underwriter GF Securities Co (廣發證券) said on Wednesday last week.
The Beijing branch of the China Securities Regulatory Commission has urged Cloud Live to tackle its repayment situation, a company statement on Wednesday said. The commission said Cloud Live should tell its biggest shareholder, which filings show is former chairman Meng Kai (孟凱), to come back to the country to solve the issue.
Meng went abroad in early October to raise money for note repayments and seek potential investors, according to a Dec. 2 company filing. There has not been an update on his whereabouts.
“There will be more credit events in 2015 and we may see a real default that results in losses for bondholders,” said Zhang Yingjie, a Beijing-based deputy general manager in the research department of China Chengxin International Credit Rating Co (中誠信國際評級有限公司), Moody’s Investors Service’s local joint venture. “If there’s no real default, the market’s perception of risk and return will be seriously distorted.”
SEMICONDUCTORS: The German laser and plasma generator company will expand its local services as its specialized offerings support Taiwan’s semiconductor industries Trumpf SE + Co KG, a global leader in supplying laser technology and plasma generators used in chip production, is expanding its investments in Taiwan in an effort to deeply integrate into the global semiconductor supply chain in the pursuit of growth. The company, headquartered in Ditzingen, Germany, has invested significantly in a newly inaugurated regional technical center for plasma generators in Taoyuan, its latest expansion in Taiwan after being engaged in various industries for more than 25 years. The center, the first of its kind Trumpf built outside Germany, aims to serve customers from Taiwan, Japan, Southeast Asia and South Korea,
Gasoline and diesel prices at domestic fuel stations are to fall NT$0.2 per liter this week, down for a second consecutive week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) announced yesterday. Effective today, gasoline prices at CPC and Formosa stations are to drop to NT$26.4, NT$27.9 and NT$29.9 per liter for 92, 95 and 98-octane unleaded gasoline respectively, the companies said in separate statements. The price of premium diesel is to fall to NT$24.8 per liter at CPC stations and NT$24.6 at Formosa pumps, they said. The price adjustments came even as international crude oil prices rose last week, as traders
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which supplies advanced chips to Nvidia Corp and Apple Inc, yesterday reported NT$1.046 trillion (US$33.1 billion) in revenue for last quarter, driven by constantly strong demand for artificial intelligence (AI) chips, falling in the upper end of its forecast. Based on TSMC’s financial guidance, revenue would expand about 22 percent sequentially to the range from US$32.2 billion to US$33.4 billion during the final quarter of 2024, it told investors in October last year. Last year in total, revenue jumped 31.61 percent to NT$3.81 trillion, compared with NT$2.89 trillion generated in the year before, according to
PRECEDENTED TIMES: In news that surely does not shock, AI and tech exports drove a banner for exports last year as Taiwan’s economic growth experienced a flood tide Taiwan’s exports delivered a blockbuster finish to last year with last month’s shipments rising at the second-highest pace on record as demand for artificial intelligence (AI) hardware and advanced computing remained strong, the Ministry of Finance said yesterday. Exports surged 43.4 percent from a year earlier to US$62.48 billion last month, extending growth to 26 consecutive months. Imports climbed 14.9 percent to US$43.04 billion, the second-highest monthly level historically, resulting in a trade surplus of US$19.43 billion — more than double that of the year before. Department of Statistics Director-General Beatrice Tsai (蔡美娜) described the performance as “surprisingly outstanding,” forecasting export growth
RSS