Yunnan, Qinghai LGFV Dollar Bonds Sell Off on Xinjiang Default

(Bloomberg) -- Dollar bonds of Chinese local government financing vehicles Yunnan Energy Investment and Qinghai Provincial Investment fell on Tuesday after a state-owned cotton producer in Xinjiang defaulted on its local currency notes.

Yunnan Energy’s 3.5% 2019 notes fell 1.3 cents on the dollar to 95.2 cents as of 1:08 pm in Hong Kong, according to Bloomberg-compiled prices.

Qinghai Provincial Investment Group’s 6.3% 2018 notes fell 0.72 cents to 98 cents.

Xinjiang Production Construction 6th Shi State-owned Assets Management missed interest and principal on a 500m yuan note on Monday. It also said in a separate announcement today that it faces difficulty in raising funds to repay a 500m yuan bond due Aug. 19.

NOTE: Xinjiang Production Default Shakes Confidence in LGFV Notes

“Offshore investor sentiment is always impacted by defaults,” said Charles Macgregor, head of emerging markets at Lucror Analytics in Singapore.

“Our research has shown the stronger LGFVs clearly outperform the market. Investors do differentiate based on relative fundamental credit quality,” he said

Macgregor considers Qingdao Jiaozhouwan Development and Huantaihu International Investment as stronger LGFVs

 

2018-08-14 05:24:31.946 GMT

By Narae Kim