The risk of default is increasing in Asia and the powerful banks in America have to revised there default-rate forecasts.
Companies of Asia have to deal with an increasing risk of default, as governments are more tolerant of corporate bankruptcies, complicating the situation as refinancing costs rise.
Beijing is also more flexible in its payment defaults, as it promotes bond market-oriented pricing, while Indian court reform is forcing large delinquent borrowers to appear in court.
The American bank JPMorgan Chase & Co. changed its forecast default rate for high yield Asian bonds to 2.8%, because these new negative factors have to be taken into account such as the recent bankruptcy of China Energy Reserve & Chemicals Group Co. JPMorgan Chase & Co expects that the amount of defaults on these debts this year will reach its highest level since the last global financial crisis.
Five major companies defaulted on their dollar obligations this year. China Energy Reserve defaulted in May, as did Hong Kong developer Hsin Chong Group Holdings Ltd.
On the whole, liquidity has tightened in the area from last year, and the Chinese government is focusing on clearing the debt of local government entities, according to Clara Lau, analyst at Moody's Investors Service...
Source: bloomberg.com