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CHINA: Chinese Corporates Foreign Company Debt the lowest in a Decade.

CHINA
EM BulletAPACChinaEmerging Market NewsBulletMarketsFixed Income BulletsForeign Exchange Bullets
  • Chinese companies’ foreign currency outstanding debt has fallen to the lowest in over a decade according to data from the Central Bank (as per BBG).
  • As the Chinese currency faces potential negative policies from the Trump administration Companies are better placed to weather currency volatility this time.
  • The reason for the reduction may ultimately have nothing to do with White House policies.
  • In recent years Chinese largest foreign bond issuers, Property Developers, have been shut off from foreign markets due to the property market collapse.
  • A result of the property crash has been interest rate cuts which in turn has cheapened local funding for companies, thereby reducing their reliance on issuing foreign currency bonds.
  • The lower FX debt burden may also provide some relief to CNY also as companies typically have to sell CNY to buy foreign currency when repaying maturing securities.
  • A second order effect of this situation may be a more supportive return environment for investors from the Asia High Yield market.
  • Historically China property issuers represented over 50% of total issuance in High Yield benchmarks and with their influence in decline, the demand for other sectors or issuers from other countries naturally increases. 
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  • Chinese companies’ foreign currency outstanding debt has fallen to the lowest in over a decade according to data from the Central Bank (as per BBG).
  • As the Chinese currency faces potential negative policies from the Trump administration Companies are better placed to weather currency volatility this time.
  • The reason for the reduction may ultimately have nothing to do with White House policies.
  • In recent years Chinese largest foreign bond issuers, Property Developers, have been shut off from foreign markets due to the property market collapse.
  • A result of the property crash has been interest rate cuts which in turn has cheapened local funding for companies, thereby reducing their reliance on issuing foreign currency bonds.
  • The lower FX debt burden may also provide some relief to CNY also as companies typically have to sell CNY to buy foreign currency when repaying maturing securities.
  • A second order effect of this situation may be a more supportive return environment for investors from the Asia High Yield market.
  • Historically China property issuers represented over 50% of total issuance in High Yield benchmarks and with their influence in decline, the demand for other sectors or issuers from other countries naturally increases.