Russia, China woes risk worst EM corporate default wave since financial crash – JPMorgan

  • EM wide corporate default rate seen at highest since GFC
  • Ukraine expected to see near 99% corporate default rate
  • Russia forecast to see 27% default rateHalf of riskier Chinese property bonds may have defaulted by year end

LONDON, April 4 (Reuters) – JPMorgan has warned that the combination of Russia’s war in Ukraine and China’s ongoing property crash could see the worst wave of corporate defaults since the global financial crisis.

A new report from the bank’s analysts on Monday estimated the EM-wide default rate would now reach 8.5%, more than double the 3.9% they expected at the start of the year before the war in Ukraine.

The volume of riskier ‘high-yield’ EM corporate international market bonds now trading at distressed levels had jumped to $166 billion, the highest since 2009 when the global financial crisis raised the default rate to 10.5%.

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Eastern Europe is predicted to see a record 21.1% default rate due to what are expected to be 98.8% and 27.3% respective rates in Ukraine and Russia where firms are now in difficulty due to the war or the West’s unprecedented sanctions.

Ukraine corporates have provided frequent updates to investors since the start of the invasion and all have painted a similar picture of their operations: exports are disrupted, revenue generation and collections are decimated.

China property sector woes, meanwhile, saw Asia’s default rate forecast lifted to 10% from 7%.

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