JP Morgan analysts have warned that missed payments by a major Chinese shadow lender may trigger a "vicious cycle" for property developers' financing and more delinquencies for trust products.
ITCMI, this is in relation to missed payments on multiple high-yield investment products:
- Three firms said late last Friday that they failed to receive payments on products issued by companies linked to Zhongzhi Enterprise Group, which has about one trillion yuan (S$187 billion) in assets under management.
JPM go on:
- Liquidity stress is intensifying for indebted developers and their non-bank creditors after a unit of Zhongzhi Enterprise Group Co., one of China's largest private wealth managers. failed to deliver on-time payments for multiple products.
- About 2.8 trillion yuan ($386 billion), or 13% of China's total trust assets may see rising default risks, given their exposure to the property industry and local government debt the report says
- Up to 80% of local government financing vehicles may not be able to repay their debt principals
- "The trust defaults may set off a vicious cycle on POE (privately-owned enterprise) developers' onshore debt," the analysts wrote. "This follows that rising concern of developer defaults weakens investment sentiment and, as a result, trust companies may not be able or willing to roll over existing real estate-related products."
JPM info via Bloomberg (gated)