The Last Place You'd Think to Hide in a Meltdown
Junk-rated Chinese property developers are more reliant on Beijing’s liquidity stance than oil prices. Things may be playing in their favor.
Cranes beat rigs.
Photographer: Brent Lewin/Bloomberg
As if markets didn’t have enough trouble. With the coronavirus outbreak intensifying, and the first shots of an oil price war fired, investors seem to be left with few good options. Could there be anywhere to hide in the world of corporate credit?
China, despite two years of record defaults, may be in better shape to withstand an oil slump than the U.S. For now, traders in Asia can sit tight and watch how hard the mighty angels on the other side of the Pacific fall.
Oil’s tailspin is bringing back harsh memories of early 2016, when West Texas Intermediate crude tumbled below $30 a barrel, well beneath the breakeven point for many American producers. U.S. junk bonds’ credit spread over Treasuries shot as high as 8.4%, almost doubling the five-year average.