Get 40% Off
🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

Russia, China property will push emerging market corporate default rate above 10%, JPMorgan says

Published 07/21/2022, 09:19 AM
Updated 07/21/2022, 10:02 AM
© Reuters. FILE PHOTO: Workers renovate a building of the Shanghai Exhibition Center in Shanghai, China May 27, 2021. REUTERS/Aly Song

LONDON (Reuters) -Emerging markets' corporate default rates this year are expected to hit 10% for the first time since the financial crisis, analysts at U.S. investment bank JPMorgan (NYSE:JPM) forecast in a note on Thursday.

The bank raised its emerging markets corporate high yield default forecast to 10.7% from 8.5% for 2022, the second hike in a year, due to the "continued deterioration in the China property space" and more Russian companies being affected by "sanctions and/or technical default" due to the war.

"Notably, the main contributor is unsurprisingly the China property segment, where the default rate is expected to reach close to 40% this year," added JPMorgan's Alisa Meyers.

Lockdowns in Chinese cities in response to the COVID-19 pandemic reduced property sector liquidity. There have been so far 24 defaults or distressed exchanges in China for $41 billion.

The bank added that Chinese developers defaulted on their entire bond stock even after extending short-term debt maturities.

© Reuters. FILE PHOTO: Workers renovate a building of the Shanghai Exhibition Center in Shanghai, China May 27, 2021. REUTERS/Aly Song

"Despite all the chatter about government support, we have only seen some tangible backings to housing demand," the report added.

Also, most Russian banks that issued eurobonds failed to make payments since March "due to restrictions introduced against these banks in the U.S. and elsewhere globally".

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.