(Bloomberg) -- China’s junk dollar bond market is on pace to decline for an eighth day, the longest such stretch since August 2023, after weak home sales data underscored the country’s deepening real estate slump.
China Vanke Co.’s 3.975% dollar bond due in 2027 declined 3.5 cents to 44 cents on Wednesday, set for the lowest since early May. A 4.25% dollar note due 2029 issued by China Jinmao Holdings Group Ltd. fell by around 2 cents, as did some bonds sold by Longfor Group Holdings Ltd., according to Bloomberg-compiled data.
The average price of Chinese high-yield dollar bonds dropped to 85.6 cents in the seven days to Tuesday, also the lowest in four months, according to a Bloomberg index.
Investors are once again on tenterhooks as Chinese builders face pressure from continued declines in property sales, sparking worries about their liquidity. The renewed turmoil cut short a market rebound earlier this year, when China’s high-yield dollar bonds rallied to their highest level in three years amid government efforts to shore up the bruised property sector.
“We are still cautious on China property names as the uncertainty is still there and we have not seen the stabilization yet,” said Andy Suen, co-head of Asia fixed income at Pinebridge Investments Asia Ltd.
The country’s housing slump deepened in August despite government efforts to support the market. Shrinking sales from Country Garden Holdings Co., Vanke and other developers have also weighed on sentiment.
“The selloff came on the back of generally weak first half results, with the still-surviving Chinese developers reporting thin margins, weaker leverage and strained liquidity,” said Leonard Law, senior credit analyst at Lucror Analytics.
Meanwhile, the central government’s attempt to ease oversupply by urging more than 200 cities in May to buy unsold homes has so far produced sluggish results, with only 29 of them heeding the call.
“There is a realization that the series of policy measures, which drove the rally in April and May, has not been as effective as desired,” Law said. “Coupled with soft macro data, this has turned into a risk-off sentiment toward China high yield.”
--With assistance from Yuling Yang.
(Updates prices in first and second paragraphs; adds comment in fifth paragraph)
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