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On Wednesday, October 13, shares and bonds of Chinese property firms fell further after Evergrande Group failed to make a third round interest payments for its US dollars bonds. This was three weeks after others warned about defaults.

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The option-adjusted spread of the ICE BofA Asian Dollar Higher Yield Corporate China Issuers Index soared to a new all-time high of 2,337 base points Tuesday evening (US Time). This is the most obvious sign yet that global investors are worried about spreading debt contagion.

Data from Shanghai Stock Exchange showed that onshore bonds issued to developers Shanghai Shimao or Country Garden Properties Group fell between 1% and 4.2 percent on Wednesday morning.

A sub-index that tracks A-shares in property firms declined 1.58 percent against a 0.31 percentage increase in the blue-chip CSI300 Index.

Due to a typhoon, Hong Kong’s markets were closed Wednesday morning.

Evergrande didn’t pay almost US$150million (S$203million) in coupons for three bonds due Monday. This was after two missed payments in September.

Although the company technically hasn’t defaulted on these payments (which have 30-day grace periods), investors claim they expect a lengthy and complicated debt restructuring process.

Hengda Real Estate Group is the company’s primary unit and will be paying a 121.8million yuan (S$25.6 Million) onshore bond coupon on Oct 19. Evergrande will also have a US$14.25Million bond coupon due Oct 30.

Evergrande is not the only place where debt pressures are extreme.

Chinese property developers have US$555.88 Million worth of high-yield bond coupons due this week and almost US$1.6 Billion due before the end of the year. Refinitiv data also shows that at least US$92.3B worth of Chinese property developer’s bonds will mature next year.

Fantasia, Evergrande’s smaller rival, has already missed a payment. Modern Land and Sinic Holdings have tried to delay payments deadlines that would most likely still be classified as default by the major rating agencies.

Capital Economics analysts wrote in a note that “These stories have challenged Evergrande’s notion of being one-of-a-kind.”

China’s policymakers may be able avoid a “doomsday scenario”, but the overextended property market will continue to weigh heavily on the second-largest economy in the world, they stated.

“Even after a thorough restructuring of the worst-affected builders with minimal contagion for the financial system, construction activity will still almost invariably slow further.”

The International Monetary Fund stated Tuesday that China is capable of solving the Evergrande indebtedness issues, but warned that a worsening of the situation could result in greater financial stress.

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