[ET Net News Agency, 7 May 2020] Moody's Investors Service said in a new report that
Chinese companies are increasingly tapping the onshore bond market amid the Chinese
government's credit easing policies and high volatility and risk aversion in the offshore
market.
"Offshore bond issuance by Chinese companies was a modest $2.8 billion in March and will
likely stay moderate in the second quarter of this year because of minimal investor
appetite for high-yield corporate bonds," said Miranda Zhai, a Moody's Analyst. "For
context, high-yield and unrated issuers accounted for 54% of offshore corporate bond
issuance in 2019."
Although onshore bond market liquidity has improved and borrowing costs have fallen,
funding access will remain difficult for some, such as financially weak low-rated
companies (i.e. those with domestic ratings of AA and below) and privately-owned
enterprises (POEs).
"Investor risk aversion has intensified because of rising uncertainties and slowing
global economic growth, which in turn has widened the credit spread of both low-rated and
high-rated Chinese companies in March," added Zhai.
Similarly, POEs' credit spread has remained much higher than the credit spread for SOEs
since 2017 in the onshore market, indicating growing concern about the ability of private
borrowers to service their debt. Moody's expects the funding costs for these low-rated
companies and POEs to remain elevated given the higher risks posed by them. (KL)