Over 90% of China Bond Funds Dropped Last Week Amid Default Woe

  • 718 bond funds' net asset value dropped last week: Howbuy
  • The 1.03% average decline was the biggest in 3 months: Howbuy

More than 90 percent of Chinese bond funds’ net asset value dropped last week as spreading corporate note defaults fueled investor concerns.

A market value of assets held by 718 bond funds dropped in the five days through April 22, accounting for 95.6 percent of all the fixed-income funds tracked by Shanghai-based research firm Howbuy. The average decline for the week was 1.03 percent, the biggest since the week ended Jan. 8, according to Howbuy.

“The sentiment in the corporate bond market is quite weak,” said Ni Xinchen, a researcher at Howbuy. “Investors are concerned corporate defaults will spread.”

Chinese companies are struggling with surging debt burdens as Premier Li Keqiang seeks to weed out zombie corporations amid the country’s worst economic slowdown in a quarter-century. Chinese junk bonds are set for their worst monthly selloff since 2014 after at least seven firms missed local note payments this year, already reaching the tally for the whole of 2015.

“The market is also worried about rising inflation expectations,” said Howbuy’s Ni.

— With assistance by Judy Chen

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