The Chinese yuan fell to its weakest level since November on Monday on mounting concerns about the country’s debt-laden property sector.
Country Garden, the largest privately-owned developer in China, missed international bond payments last week and suspended trading in nearly a dozen of its onshore bonds on Monday, adding to speculation that the company may be preparing to enter a debt restructuring.
Shares of Country Garden slumped 18.4% in Hong Kong trade on Monday, after finishing off a difficult week that saw its shares drop 31%, according to FactSet data. Two clients of Zhongrong International Trust Co. Ltd. announced on Friday that Zhongrong failed to repay maturing trust products they had purchased. Zhongrong’s key shareholder is the financial conglomerate Zhongzhi Enterprise Group, which manages about $138 billion.
Bechtel said the more days that go by without a comprehensive fiscal stimulus plan, the more it looks like there may not be one. “What is also clear is that there are a myriad of debt-related issues that are popping off just now, and that we know very little about what is actually going on underneath the hood there,” he wrote in a Monday note.
The PBOC controls the yuan’s rate on the mainland by setting a so-called daily midpoint fix, based on the currency’s closing level in the previous session and quotes from interbank dealers. The offshore yuan, however, has no restrictions on its trading range.
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