SHANGHAI: Chinese banks and fund managers dumped their holdings of riskier corporate bonds on Friday after a series of defaults by top-rated state-owned enterprises sent shockwaves through the mainland corporate bond market.
Investors have traditionally seen bonds issued by state-owned firms as less risky due to their perceived government backing. The nervousness also spilled into the stock market, where Chinese banking shares fell on Friday over concerns they would face increased bad loans. But the meeting was cancelled after too many creditors attended, raising fears of chaos, said three people with knowledge of the situation.
With debt running at three times GDP, Chinese debt markets are prone to let off steam but this is the first time since mid-2019 when regulators took over Baoshang Bank that credit stresses have shown up. A number of bond sales have been cancelled over the past few days, while banks have raised the bar for corporate bonds to be used as collateral, traders and a regulatory source said.