JPMorgan hiked its forecast for global emerging market corporate high-yield bonds’ default rate this year from 6% to 9.7%, citing the debt crisis in China’s real estate sector.
China’s property industry expected to account for nearly 40% of this year year’s corporate defaults, followed by Russia’s 35% and Brazil’s 12%, said JPMorgan in a note.
The bank also raised its forecast for Asian high-yield default rate from 4.1% to 10%, mainly due to the debt problems of Country Garden and other knock-on effects to the mainland real estate industry, it said.
A full default by Country Garden would add $9.9 billion to total emerging-market corporate high-yield defaults so far this year, and bring total defaults by Chinese property sector to $17 billion, it said.