Sales of Chinese keepwell bonds to shrink after ‘epic, unproductive' court fight, S&P says
Advertisement
The Hong Kong Court of Final Appeal on March 19 published its
ruling that three offshore issuers and guarantors of Peking University Founder Group (PUFG) – the business arm of China's elite university – were only entitled to 'nominal damages' after its units defaulted in 2020 on bonds totalling US$1.7 billion.
'While it awarded nominal damages to the plaintiff, investors' losses remain deep,' Chang Li, China country specialist for corporate ratings, said in a report on Tuesday. 'The PUFG case was an important test of the structure's ability to address offshore investors' subordination risk in a default. So far, it has come up short.'
Keepwell bonds were popular with Chinese companies seeking to issue dollar-denominated bonds through their offshore entities before 2017, bypassing state currency regulators. In providing such deeds, the onshore parent pledged to keep the issuing vehicle solvent by at least US$1 to make good on all its obligations.
The issuance fell to about US$7 billion in 2024 from about US$30 billion in 2017, S&P said, bringing the outstanding Chinese keepwell-backed bonds in the market to US$62 billion.
Advertisement
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
RTHK
an hour ago
- RTHK
HK stocks inch up ahead of tech heavyweight earnings
HK stocks inch up ahead of tech heavyweight earnings The Hang Seng Index closed up 48 points ending the day at 24,906. File photo: RTHK Mainland and Hong Kong stocks mostly ended trading with gains on Monday as investors focused on China-US trade truce developments. The benchmark Hang Seng Index closed up 47 points, or 0.19 percent, at 24,906. The Hang Seng China Enterprises Index fell 0.08 percent to end at 8,888 while the Hang Seng Tech Index fell 0.01 percent to end at 5,460. Investors are also awaiting earnings reports from market heavyweights this week, including Tencent, Meituan, and Alibaba. On the mainland, the benchmark Shanghai Composite Index ended up 0.34 percent at 3,647 while the Shenzhen Component Index closed 1.46 percent higher at 11,291. The combined turnover for these two indexes was 1.83 trillion yuan – up from 1.71 trillion yuan on Friday. Observers expect US President Donald Trump to announce an extension of a trade war truce reached with China last month, ahead of a 90-day deadline set for Tuesday. (Agencies)
South China Morning Post
an hour ago
- South China Morning Post
Chinese stocks' foreign inflows gathering steam, Morgan Stanley says
Foreign inflows to Chinese stocks will probably continue after the summer, as a regulatory push to boost shareholder returns, appealing valuations and rising expectations of interest-rate cuts in the US lure investors, according to Morgan Stanley. The rotation back to Chinese stocks was expected to be 'stronger' after two consecutive months of net buying by global long-only funds, analysts led by Laura Wang at the US investment bank said in a report on Friday. Long-only funds poured US$2.7 billion into Chinese stocks in July, accelerating from a net inflow of US$1.2 billion in June, the report said. That came despite holdings reductions by some large actively managed mutual funds focused on Asia excluding Japan, it said. Shunned over the past few years, Chinese stocks are now back on the radar for global investors after trade tensions between Beijing and Washington de-escalated and the mainland's first-half economic growth exceeded estimates. Hong Kong's Hang Seng Index has gained 24 per cent this year, and the CSI 300 Index of mainland-listed shares has added almost 5 per cent. 'China, with the second-best earnings revision breadth trend and a more fair valuation compared to other markets, should once again attract additional fund flows,' Wang said. 'As we approach the Fed rate cut schedule and a higher consensus towards a weaker US dollar, global investors' willingness to allocate into non-US markets should also pick up.' The bank's assessment dovetails with China's official data on foreign buying. Overseas investors bought a combined US$10.1 billion of onshore stocks and mutual funds in the first half, starting to reverse the flight over the past two years, the foreign-exchange regulator said last month.
RTHK
2 hours ago
- RTHK
HK stocks inch up ahead of tech heavyweight earnings
HK stocks inch up ahead of tech heavyweight earnings The Hang Seng Index closed up 48 points ending the day at 24,906. File photo: RTHK Mainland and Hong Kong stocks mostly ended trading with gains on Monday as investors focused on China-US trade truce developments. The benchmark Hang Seng Index closed up 48 points, or 0.19 percent, at 24,906. The Hang Seng China Enterprises Index fell 0.08 percent to end at 8,888 while the Hang Seng Tech Index fell 0.01 percent to end at 5,460. Investors are also awaiting earnings reports from market heavyweights this week, including Tencent, Meituan, and Alibaba. On the mainland, the benchmark Shanghai Composite Index ended up 0.34 percent at 3,647 while the Shenzhen Component Index closed 1.46 percent higher at 11,291. The combined turnover for these two indexes was 1.83 trillion yuan – up from 1.71 trillion yuan on Friday. Observers expect US President Donald Trump to announce an extension of a trade war truce reached with China last month, ahead of a 90-day deadline set for Tuesday. (Agencies)
