The rally in Asian credit strengthened yesterday afternoon with the surge in HK equities, HSI closing +2.72%. Investors looked past KWG’s travel restriction story highlighted in yesterday’s comment and rallied as much as 5pts, Sunac continued to squeeze, up 8pts, and Shimao was up 6pts.
Evergrande’s new “risk management committee” line up is interesting. The previously removed founder, Xu Jiayin, is pulled off the bench to line up as co-chair with the DGM of Guangdong Holdings, a local govt funding vehicle (LGFV). They are joined by representatives of Guangzhou Yuexiu, another LGFV, and China Cinda. It seems that they are following the HNA saga, where Hainan province sent a task force of state officials to join the company’s board. It seems that a restructuring rather than a creditor repayment plan is on the cards.
Global markets rebounded further on pledges from China to support economic growth and optimism that Omicron will not impede it. Oil also benefitted, WTI up 4.2% to USD72.41/bbl. It looks like the debt ceiling issue may be behind us and there has been positive action on the Ukraine/Russia/US situation so calm markets should help the passage of the German and U.S. 10yr auctions tonight, €3bn bunds and $36bn notes.