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Fund Spy

After Evergrande, Is Fantasia’s Collapse a Sign of Worse to Come?

Fund managers see the stresses on China’s property market as temporary and are on the hunt for bargains.

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As Chinese property developer Evergrande Group lumbers from one missed bond payment deadline to the next, its troubles continue to reverberate across financial markets. On Tuesday, Oct. 12, Evergrande skipped USD 148 million in interest payments to external bondholders after missing a USD 83.5 million interest payment in late September. By Wednesday, Oct. 13, the yield on the ICE BofA Asian Dollar High Yield Corporate China Issuers Index (where the property sector accounts for more than three fourths of issues) spiked to a 10-year high of 24.3%, up from 7.8% at the end of 2021, as investors rushed to offload bonds tied to the country’s real estate industry. The yield on the broader ICE BofA Asian Dollar High Yield Index also jumped to 15.6% on Wednesday, up from 7.5% in December 2020. Many investors worry that the company’s woes signal broader weakness across the housing market, where high debt ratios are colliding with stringent new funding laws and slowing sales.

Shannon Kirwin does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.