JPMorgan raises default EM forecast as Country Garden raises contagion concerns in China
In an Aug. 15 note, JPMorgan raised its 2023 high-yield corporate default forecast for global emerging markets to 9.7% from 6%.It also raised its forecast for Asia's high-yield default rate to 10% from 4.1% - a figure that falls to just 1% if you exclude Chinese assets.The bank expects Chinese real estate to account for nearly 40% of all high-yield defaults in emerging markets by 2023.
JPMorgan raised its forecast for high-yield corporate defaults in global emerging markets, largely due to growing concerns about contagion in China's real estate sector from a possible Country Garden default.
The US-based investment bank raised its global forecast for 2023 to 9.7% from 6% in an Aug. 15 note. It also raised its forecast for Asia's high-yield default rate to 10% from 4.1% - a figure that drops to just 1% when assets in China are excluded.
JPMorgan expects assets in China to account for nearly 40% of all default volumes in 2023, followed by 35% from Russian companies and 12% from Brazilian issuers.The size of the increase in JPMorgan's default risk rating underscores concerns that Country Garden's debt default will have a much wider ripple effect on China's real estate sector and the wider economy.
In the same note, JPMorgan said Country Garden's default could add $9.9 billion to the year-to-date high-yield defaults in global emerging markets, bringing the total number of defaults in China's real estate sector to date in 2023 to 17 billion dollars.
JPMorgan estimates that Country Garden's failure could also lead to $8 billion in debt defaults on remaining smaller Chinese developers and another $2 billion in "some sort of liability management exercise" from spillovers into other high-yielding Chinese sectors.
According to JPMorgan, they have defaulted on more than $100 billion in debt tied to assets in China over the past two and a half years. Before Country Garden, China's real estate sector had already recorded $109 billion in non-performing loans since the start of 2021, accounting for 94% of Asia's total non-performing loans during that period.
JPMorgan also raised its default rate forecast for Latin America to 7.1% from 6.6% after Brazil's Odebrecht Engenharia e Construcao appeared to start another round of debt restructuring that could affect $1.9 billion in dollar bonds .
The bank raised its default forecast for emerging Europe to 23.4% from 15.7% to reflect the inclusion of Russian corporate bond defaults, which were mostly "technical" as sanctions from Russia's war in Ukraine prevented firms from raising bonds with international investors.
In a major development that sent shockwaves through the global financial landscape, JPMorgan recently revised its emerging market (EM) default forecast. The bank's cautious adjustment comes in response to growing concerns about potential contagion emanating from Chinese property giant Country Garden. This article delves into the details of this situation, highlighting the key factors and their implications for emerging markets and the wider global economy. JPMorgan, EM default forecast, China contagion concerns, Country Garden, emerging markets, global economy.
Concerns about the Chinese contagion:
China's real estate market, long seen as the engine of its economic growth, has recently experienced increased turbulence. Country Garden, one of China's largest developers, has come under increased scrutiny due to its growing debt load and potential liquidity problems. As a result, concerns about the possible impact of the contagion on global financial markets have intensified.China's real estate market, economic growth, developers, debt burden, liquidity problems.
JPMorgan's revised default EM forecast:
In this context, JPMorgan, the world's leading financial institution, has revised its EM default forecast. The bank now expects a more challenging environment for emerging markets, driven by the potential impact of China's property market woes. This updated forecast reflects the interconnectedness of today's global economy, where events in one region can have far-reaching consequences around the world.JPMorgan forecast, EM defaults, global financial institutions, China's real estate market, economic interconnectedness.
Country Garden's Impact on Emerging Markets:
The financial strain facing Country Garden has raised concerns about its ability to meet its debt obligations, which could trigger a ripple effect in China's real estate sector. This, in turn, could undermine investor confidence and accelerate the outflow of capital from emerging markets. Fears of a ripple effect led JPMorgan to take a more cautious stance on the outlook for these economies.Country Garden financial stress, debt obligations, real estate sector, investor confidence, capital outflows, emerging markets.
Implications for the global economy:
The interplay between China's economic dynamism and the broader global economy cannot be overstated. As the world's second-largest economy, any significant disruptions in China's real estate sector could ripple through global supply chains, commodity markets and financial institutions. JPMorgan's decision to revise its EM default forecast is a clear acknowledgment of the potential impact of China contagion concerns on the global economic environment.China's economic dynamics, global supply chains, commodity markets, financial institutions, global economic landscape.
Heightened concerns surrounding China's real estate giant Country Garden prompted JPMorgan to raise its EM default forecast. This adjustment serves as a stark reminder of the complex interconnectedness of today's global financial system. As the situation continues to develop, all eyes will remain on how China manages its property market challenges and the resulting implications for emerging markets and the wider global economy.
China's real estate market challenges, global financial system, emerging markets, global economy, JPMorgan forecast revision.In a rapidly evolving financial environment, the relationship between China's economic health and the global market has come into focus. As JPMorgan's revised forecast shows, vigilance and preparedness are key as the world navigates these uncertain times.
JPMorgan, a leading financial institution, revised its default forecast for emerging markets (EM) in response to growing concerns about China's economic stability. Concerns about contagion have been heightened by recent developments involving Country Garden, a major Chinese real estate developer. This article delves into the reasons for JPMorgan's decision and Country Garden's role in fueling fears of contagion in the Chinese economy.JPMorgan, EM default forecast, China contagion concerns, Country Garden, economic stability, real estate developer.
Escalation of concerns
Recent developments in China's real estate sector, particularly involving Country Garden, have set off alarms in international financial markets. The cascading effect from potential problems facing one of China's biggest real estate companies has led to widespread fears of contagion within the wider Chinese economy.Chinese real estate sector, international financial markets, cascading effect, challenges, Chinese economy.
The role of the country garden
Country Garden, aplayer in China's property market, has attracted attention due to its significant leverage and exposure to the wider financial system. The company's financial health is closely monitored, as any disruption or failure in its operations could have far-reaching consequences for the entire Chinese economy.Country Garden, property market, debt levels, financial system, disruption, default, Chinese economy.
JPMorgan's revised default EM forecast
In response to the evolving situation, JPMorgan decided to raise its EM default forecast. The move reflects the institution's concerns about potential contagion effects emanating from China's property market. While the immediate impact may be felt in China, the interconnected nature of the global economy means that other emerging markets could also experience ripple effects.JPMorgan's default EM forecast, contagion effects, Chinese property market, global economy, emerging markets, ripple effects.
Chinese Measures and Global Consequences
To quell fears of the contagion and stabilize its economy, Chinese authorities have launched measures aimed at supporting the financial system. These measures include increased supervision of the debt levels of real estate companies, increased regulatory scrutiny and support for targeted sectors. Despite these efforts, the global implications of a potential Chinese economic downturn cannot be ignored, as interconnected financial markets could amplify the effects.Chinese measures, economic stabilization, financial system, real estate companies, regulatory scrutiny, global implications, economic downturn, financial markets.
With JPMorgan revising its EM default forecast upward and concerns about contagion in the Chinese economy lingering, the role of Country Garden and its potential impact on the broader financial landscape cannot be understated. The interconnectedness of global markets underscores the need for constant vigilance and proactive measures to mitigate potential risks. Investors and politicians around the world are closely watching developments in China, aware of the potential for a domino effect that could affect economies far beyond its borders. JPMorgan forecast revision, contagion concerns, Country Garden impact, global markets, potential risks, investors, policy makers, domino effect, economies.
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