Chinese firms delay or cancel S$14b of bond issuance in April

Employees work at a factory of Dongbei Special Steel Group in Dalian, China, on March 31, 2016.
Employees work at a factory of Dongbei Special Steel Group in Dalian, China, on March 31, 2016.PHOTO: REUTERS

SHANGHAI (REUTERS) - Chinese firms have delayed or cancelled at least 68.8 billion yuan (S$14.31 billion) of bond and other fixed income issuance so far in April, bond market data sources showed on Tuesday (April 19).

Around 70 firms have delayed or cancelled issues, many in excess capacity industries including cement and mining, according to data compiled from China's two main clearinghouses for the interbank market and the interbank market operator.

An increasing number of Chinese firms in excess capacity industries have encountered repayment difficulties this year as economic growth slows and the government pushes on with painful structural reforms. That has led to higher rates of cancelled bond issues as investors shy away from those sectors.

Chinese fixed income yields, including treasury rates, have moved up noticeably since the beginning of the month in what traders and analysts say is a reaction to signs of strong supply growth and reduced expectations of further monetary easing, in addition to a rash of defaults by industrial firms including Dongbei Special Steel Group Co Ltd.

Benchmark five-year treasuries are up 17 basis points since the beginning of April, although sharp rises following last week's strong March activity data appear to have leveled off.

A separate report from the online financial magazine Caixin, using only data from the market operator, found that close to 60 billion yuan of debt had been cancelled or delayed in April.