JP Morgan warning on China property sector developments: "may set off a vicious cycle"

<p>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. </p><p>ITCMI, this is in relation to missed payments on multiple high-yield investment products:</p><ul><li><a href="https://www.straitstimes.com/business/china-shadow-banking-giant-alarms-investors-with-missed-payments" target="_blank" rel="nofollow">Three firms said late last Frida</a>y 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.</li></ul><p>JPM go on:</p><ul><li>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.</li><li>
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</li><li>Up to 80% of local government financing vehicles may not be able to repay their debt principals</li><li>
"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."</li></ul><p>JPM info via Bloomberg (gated)</p>

This article was written by Eamonn Sheridan at www.forexlive.com.