Our view on Sunac’s default and its implications for the China property sector.

On May 11, Sunac, the fourth largest developer in China, defaulted as it missed a coupon payment on its offshore dollar bonds. In contrast, it extended the maturity of its onshore bond that matured in April. Sunac bond prices were relatively stable at approximately $20 as the default had mostly been priced in. Even with the reduced cash flow needs, the liquidity crunch for Sunac is likely to continue in the near term given its sharp decline in contracted sales and the slow progress of its asset disposals.

Reflections on the lockdowns and prospects for the A-shares market.

It has been a month since Shanghai entered into lockdowns due to the Omicron outbreak. Like many city residents, I’m currently confined in my home and unable to go out. The confinement has also provided an opportunity to share my views on the Chinese economy and A-shares market:

We are already seeing the impact of lockdowns on China GDP, which according to estimates may have been reduced by about 100 basis points—lowering 2022 consensus from 5.5% to 4.5%. Adding to the uncertainty is the trajectory of the pandemic: ...