Updated: Apr 1
Friday 26 Nov 2021
Thanksgiving gave no respite to China HY property bonds, fast money was busy shorting the likes of Shimao Group. Real money provided support once the market had slumped as much as 4 points. KAISAG kept pace with the slump following the exchange announcement, there is some speculation it is a ruse to appease the regulators.
Off balance sheet items are in the headlines. China Aoyuan is in for a little more aggravation as holders of a USD150mm note issued by the SPV “Rainmaker” invoke a prepayment guarantee after a failure to execute term-out documents (a revolving facility term). In September Aoyuan had denied a rumour on WeChat of the existence of this off balance-sheet bond which was issued by Orient Securities in HK.
Meanwhile holders of the recently revealed Jumbo Fortune bond prepare to re-invoke Evergrande guarantee if unfulfilled condition not met by 29 November deadline. A major subsidiary of Fantasia Holdings faces a winding-up petition in connection with alleged USD 149m loan facilities which Fantasia Investment guaranteed.
Meanwhile is South-East Asia we have balmy weather. There was better buying of Singapore bank subordinated debt while the Thai long end was heavy, more due to lack of liquidity than anything else. In Germany the Bundesbank is worrying about real estate bubbles. VP Claudia Buch stated “residential property prices are 10% to 30% above the value justified by fundamentals”. The boom in the construction continues with price adjusted new orders for September up 6.2% m/m. Germany Q3 final GDP was slightly lower than expected at 1.7% as German consumer confidence for December slipped to a 6-month low of -1.6%.
The ECB minutes didn’t shed much light on potential APP expansion after PEPP, but did state that rate hikes are further off than the market expects.