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  • The HY credit market in China keeps being distressed as the uncertainty over Chinese real estate developer giant Evergrande has been surging.
  • Shortly after China officials recently said to the company's creditor that the company will not pay interest on its debt nor repay its principal, Evergrande main unit said that trading on all of its onshore bonds will be suspended on Thursday.
  • The yield on the RMB-denominated bonds due in 2025 surged above 50% in September according to Bloomberg.
  • The company's stocks (3333 HK Equity) is down over 90% since July 2020 and has been weighing on the entire EM real estate sector.
  • The chart below shows that while Evergrande price-to-book ratio collapsed from a high of 4.5 in June 2017 to a low of 0.20 today, the price-to-book ratio of EM real estate stocks fell from 1.6 to 0.92 over the years, making the whole sector appear cheap (relative to other EM equities).

Source: Bloomberg/MNI