Chinese property firms' bonds were hit with another wrecking ball on Monday as Evergrande looked set to miss its third round of bond payments in as many weeks and rivals Modern Land and Sinic became the latest scrambling to delay deadlines.
High-yield Chinese bond markets were being routed once again as fears about fast-spreading contagion in the $5 trillion sector, which drives a sizable chunk of the Chinese economy, continued to savage sentiment.
Weary investors had been holding out little hope that Evergrande would suddenly stump up Monday's near $150 million of coupon payments, but the fact bondholders said they hadn't received anything this time either just bolstered expectations for a full-scale default.
Once China's largest developer, the firm has more than $300 billion in liabilities that are now at risk.
Other signs of stress included smaller developer Modern Land asking investors to push back by three months a $250 million bond payment due on 25 October in part "to avoid any potential payment default."
Sinic Holdings said it too was likely default next week as it didn't have enough financial resources to make its remaining bond payments this year.
It has one at the start of next week, although that bond was already down 75%.
Modern Land's April 2023 bond with a coupon of 9.8% plunged more than 25% to 32.25 cents on the day, according to financial data provider Duration Finance, while the company's shares have lost a third of their value over the last month.
Kaisa Group, which was the first Chinese property developer to default back in 2015, also saw some of its bonds slump to well under half their face value.
R&F Properties and Greenland Holdings, which both have prestige projects in global cities like London, New York and Sydney, were also widely sold.
"It's a disastrous day," said Clarence Tam, fixed income portfolio manager at Avenue Asset Management in Hong Kong, highlighting how even some supposedly safer "investment grade" firms had now seen 20% wiped off their bonds.
"We think it's driven by global fund outflow .... Fundamentally, we are worried the mortgage management onshore hits the developers' cash flow hard," he added, referring to concerns people could stop putting deposits down on new homes.
Analysts at JPMorgan also highlighted how international investors were now demanding the highest ever premium to buy or hold 'junk'-rated Chinese debt.
There is now a whopping 1,200 basis point difference between the bank's closely-followed JACI China high yield index and a similar index of investment grade AA-rated local Chinese market bonds, known as "onshore" bonds.
"Evergrande's contagion risk is now spreading across other issuers and sectors," JPMorgan's analysts said.
Another London based analyst who asked not to be named said: "Slowly and gradually we are seeing the rest of the Chinese property sector fall apart".
