Asia’s fast-growing bond market faced its biggest challenge earlier this year, with the sudden fall from grace of Kaisa, the Shenzhen-based property developer.
On Tuesday, Standard & Poor’s downgraded Kaisa to “D”, meaning default, after it missed two bond coupon payments — the latest twist in a tale that sent panic through the Chinese real estate sector just a few weeks earlier. Its ability to reach a quick deal with creditors remains “highly uncertain”, the rating agency said.
Yet initial fears that contagion would spread through the credit market appear to have blown over. Bond prices have recovered, and investors are once again lending billions of dollars to Chinese homebuilders. So has this impromptu stress test been passed with flying colours?