JPMorgan Raises Global High-Yield Default Forecast on China Property Sector Contagion Fears

📌JPMorgan has increased its global emerging markets corporate high-yield default prediction due to heightened concerns over contagion stemming from potential default by China’s Country Garden. In its August 15 note, the US-based bank raised its 2023 global forecast from 6% to 9.7%, alongside a rise in the Asia high-yield default rate forecast from 4.1% to 10%. Excluding China’s property sector, this rate drops to only 1%.

📌JPMorgan anticipates that China’s property defaults will contribute around 40% of all defaults in 2023, followed by 35% from Russian entities and 12% from Brazilian issuers. The bank’s increased risk assessment underscores fears that a Country Garden default could have a widespread impact on China’s property market and the broader economy.

📌China’s property sector has been grappling with a debt crisis since 2020 due to the «three red lines» policy that constrains developers’ debt levels. This has hampered growth as the sector is a significant contributor to China’s economy. A potential Country Garden default could add around $9.9 billion to the global emerging markets high-yield corporate default in 2023.

Source: CNBC