In the history of China’s bond development, 2020 is a year worth remembering.
In November 2020, the AAA-level state-owned enterprise Yongcheng Coal and Electricity Holding Group Co., Ltd. (hereinafter referred to as Yongmei Group) defaulted on bonds, shocking the market and impacting the industry’s high The belief in “just redemption” of credit-grade state-owned enterprise bonds. Weakly qualified local state-owned enterprise bonds were sold off, bonds in the secondary market fell sharply, the net value of bond funds redeemed fell sharply, and comprehensive risk investigations for investment institutions.
In 2021, will credit risk events aggravate credit contraction, which will lead to accelerated default exposure?
2021 is the peak period for bond redemption
According to Wind data, as of December 31, 2020, as of December 31, 2020, credit bonds are due and repaid in 2021. The amount is 6.4 trillion yuan, and after excluding the amount issued and due that year, the maturity of credit bonds in 2020 and 2019 will be 5.2 trillion and 4.7 trillion respectively.
S&P Credit Rating pointed out that 2021 is a peak period for bond redemption. Recent credit events may increase the refinancing and liquidity pressures of tail companies Default Risk.
The aftermath of the credit incident is still there, and related credit default incidents such as Yongmei Holdings still put pressure on corporate bond financing. According to the statistics of recent failures in the issuance of credit bonds, the number of failures in the issuance of credit bonds and the total amount of related bonds have increased significantly after November last year; at the same time, the maturity of credit bonds at the end of the year has increased, and the bond market yield has continued to decline. Postpone the debt financing needs of some companies.
S&P Credit Rating predicts that the domestic economy will continue to recover in 2021, and the annual GDP growth will rebound to 7.0%. In this context, most industries will usher in revenue and profit improvement, which will drive the overall credit status of enterprises to be restored in 2021. However, considering the series of default events that occurred in 2020, it is more necessary to pay attention to the credit status of tail companies; it is expected that the credit quality of most tail companies in 2021 will be further weakened on the basis of 2020, and it is possible to increase such companies. The risk of default.
Net financing may decrease compared to 2020
In 2020, the overall volume of credit bond issuance will be increased. The annual issuance volume was 511.8 trillion yuan, a year-on-year increase of 28.8%, and the net financing amount was 3.1 trillion yuan, 1.1 trillion yuan higher than the previous year.
S&P Credit Rating pointed out that companies will face several unfavorable factors, especially for tail companies: The credit environment may be moderately tightened. In 2020, in the ultra-conventional and relaxed environment of fighting the epidemic, the annual growth rate of social financing and M2 growth will be higher than 10%. If the two return to normalization in 2021, the growth rate of social financing will decline moderately, while the growth rate of M2 has actually reached its peak in April, and will start to maintain or decline in the later period. This tightening reflects that the decision-makers have absorbed the experience of over-expansion in the past few rounds of counter-cycles and adopted a more prudent strategy. The adjustment of loose monetary policy means that the credit environment may be moderately tightened, which in turn highlights the debt pressure of enterprises, especially those with high leverage.
Looking forward to 2021, Oriental Jincheng Research and Development Department believes that after Yongmei’s default event, the continuous negative net financing of credit bonds will not continue. The impact on the market will be further eased, and the net financing of credit bonds will gradually recover. However, from the perspective of the whole year, mainly due to the rise in the interest rate center and the tightening of the financing margins of major bond issuers such as urban investment and real estate, the net financing demand for corporate bonds in 2021 will cool down compared with 2020.
First of all, under the expectation that funding interest rates will revolve around policy interest rate fluctuations, risk-free interest rates will mainly fluctuate, and credit spreads will face greater pressure to widen, credit The central bond issuance interest rate will increase significantly compared with 2020.
Secondly, in 2021, the demand for stable growth will decline, and the stabilization of the macro leverage ratio will become an important policy goal. This means that the space for further development of infrastructure is limited, and the debt expansion of housing enterprises Will continue to be constrained. As a major bond issuer, the net financing needs of urban investment platforms and real estate companies may decline.
Finally, the manufacturing industry will take over infrastructure and real estate in 2021 and become the main driving force for investment growth. A sharp rebound in manufacturing investment will drive the recovery of corporate financing demand. However, considering the current policy level that encourages banks to increase medium and long-term loan support to manufacturing companies, the rebound in manufacturing investment may not significantly stimulate corporate bond financing demand.
The research and development department of Oriental Jincheng judges that the net financing demand of corporate bonds in 2021 will be less than that in 2020, especially the net financing demand of high-grade bonds with strong financing channel switching capabilities Or it will drop significantly. ForeseeIt is estimated that the net financing of credit bonds in 2021 will fall from 3.1 trillion yuan in 2020 to about 2 trillion yuan.
The probability of a large-scale “default wave” of state-owned enterprises is very small.
In 2021, the credit bond market will face the pressure of rising default risks.
Sun Binbin, chief fixed-income analyst at Tianfeng Securities, also said recently that nearly 3 months have passed since the Yongmei incident, and there is still no low-grade credit spread on the secondary market. Signs of narrowing; in December last year, although the scale of credit bonds that were delayed or failed to be issued in the primary market dropped significantly compared with November, it was still significantly higher than the same period last year. The issuance of credit bonds in certain regions still faces difficulties. This shows that although the impact of credit events is fading, the market impact still exists.
Oriental Jincheng Research and Development Department analyzed that in the fourth quarter of 2020, local state-owned enterprises’ default events could have such a dramatic impact on the market. An important reason is that the market has The subject has a strong “state-owned enterprise belief” and is expected to be able to obtain support from the local government in debt repayment. The failure of this expectation shows that even for large and important state-owned enterprises in the region, there is still greater uncertainty about the willingness of local governments to help them, which shakes the foundation of the “state-owned enterprise belief”. At the same time, with the current macroeconomic policies gradually returning to normal, credit expansion slowing, and state-owned enterprise reforms continuing to advance, and “zombie state-owned enterprises” continue to clear expectations, the market is facing the medium and long-term default risks of the bond market, especially weak-qualified state-owned enterprises and tail cities. Worries about accelerating exposure of investment credit risk led to the spread of pessimism. However, under “holding firmly to the bottom line of no systemic risks” and intensifying the enforcement of “debt evasion” and other violations of the bond market, the probability of large-scale state-owned enterprises’ “violation of contract” in 2021 is very small , State-owned enterprises’ defaults will still show point-like distribution characteristics. It is necessary to focus on the risk of default by state-owned enterprises in the tail end of which the economy of the industry is sluggish, the financial resources of the region are weak, their own debt burden is heavy, and the scale of assets is large but liquidity is tight.
On the other hand, large-scale local state-owned enterprises’ default events will make the valuation and pricing of local state-owned enterprises’ credit bonds face reconstruction, and credit spreads between regions, industries, and grades will become even more divergent , The difficulty of financing weak-qualified state-owned enterprises in sensitive areas or industries has increased, leading to an increased risk of default. Therefore, the trend of credit risk migrating to local state-owned enterprises in 2021 may continue.