From CNBC: 2024-04-24 04:09:19

Residential buildings near completion in China at the Phoenix Palace project, developed by Country Garden Holdings Co. State-directed economy in China could see new wave of bond defaults as early as next year, S&P Global Ratings report suggests. Corporate bond default rate in China fell to 0.2% in 2023.

Real estate sector struggles in China after crackdown on developers’ debt reliance. Property market downturn weighs heavily on economy, shows minimal signs of recovery. Sector led latest wave of defaults, following by industrials and commodity firms. Government’s challenge now is stabilizing property prices to offset negative wealth effects.

Concerns over economic growth as most sectors saw drop in bond defaults in 2023. Large debt levels in China raise systemic financial risk concerns. IMF calls for comprehensive strategy to address real estate issues, promote innovation, and strengthen social safety nets. Uncertainty remains on sectors to offset property market’s drag on economy.

UBS upgrades MSCI China stocks to overweight on better corporate earnings performance. China underperformance due to valuation collapse, but earnings show early signs of consumption pick up. Bank also upgrades outlook on Hong Kong stocks due to growing trend of positive surprises on dividends and buybacks by Chinese companies.

Read more: China may have to brace for a new wave of bond defaults, S&P says