Goldman Sachs raises China property HY 2022 default rate to 19%

FILE PHOTO: The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly

January 12, 2022

LONDON (Reuters) – Goldman Sachs said on Thursday it now expected almost a fifth of lower-rated Chinese property firms to default this year, although it could be almost a third in a more severe scenario.

The U.S. investment bank raised its base case default rate estimate to 19% from 11% previously and its downside case estimate to 31.6% from 25.4%.

“Whilst there have not been many incidences of payment defaults in recent weeks, stresses are picking up,” Kenneth Ho wrote in a note to clients on Wednesday.

“The coming months will see heavy bond maturities across China Property HY, with potentially more maturity extensions/bond exchanges to emerge, as well as payment defaults.”

Goldman Sachs estimates high yields firms have $3.6 billion worth of bonds maturing by the end of the month, followed by $3.3 billion in March and another $3.7 billion in April.

(Reporting by Karin Strohecker; editing by Marc Jones)

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