Assessing Evergrande's impact on Asian high yields

Disorderly default unlikely

Concerns over property developing giant China Evergrande Group defaulting on its debt have rippled across the global financial markets.

In the Asian high-yield (HY) space, spreads have widened recently on the Chinese government's tightening of its property sector and increasing default risks associated with the sector in the wake of developments related to Evergrande. From a fixed income market perspective, we present potential scenarios for Evergrande, discuss the impact of the company's restructuring on the US dollar-denominated Asian HY market and assess the implications for the property developer's stakeholders. We see three potential scenarios for Evergrande going forward: 1) a disorderly default (bear case, unlikel...