China's high-yield dollar bonds are heading for their worst week in more than a year as signs of liquidity strains at state-owned conglomerate Zhuhai Huafa Group Co. sapped sentiment. The average price of Chinese high-yield dollar bonds dropped about 1.9 cents this week through Thursday, setting it up for the biggest one-week decline since April 2025, according to a Bloomberg index.
The selloff gathered pace after people familiar with the matter said Huafa was in talks with creditors to push back some of its debt payments. Fitch Ratings said this week that it had placed the company on negative watch due to heightened refinancing risks. Huafa is 100% owned by local governments in Guangdong province and derived about half of its revenue from property development and urban operations last year.
"China's high-yield bond market has sold off sharply, with pressure spreading to credit bonds issued by other large Chinese companies," said Li Huan, co-founder of asset manager Forest Capital Hong Kong Ltd. "Institutions are selling not only Huafa but also weaker Guangdong issuers and similar companies whose bonds are easier to sell."
Huafa's offshore yuan bonds due in December 2027 tumbled by more than 40% in the first four days of this week to a distressed level of 54% of face value on Thursday. The notes pared some losses to trade at about 58% of par on Friday morning, after a person familiar with the matter said the company has repaid some investors holding one of its overdue trust products. Huafa, known for landmark buildings such as the 330-meter-high Zhuhai Tower, reported a total loss of 16.9 billion yuan ($2.5 billion) for 2025, and had about $62 billion of interest-bearing liabilities as of March.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing