LONDON BOSTON Reuters -- Just three months after narrowly avoiding collapse, the world's most indebted developerChina Evergrande Group is teetering on the brink again, and investors are still not sure how long or how long the problems could reverberate.
Evergrande has been the poster child of a property crisis in China this year, which has ripped down nearly a dozen smaller developers, with over $300 billion of liabilities and more than 1,300 real estate projects.
Evergrande could still pay an overdue $82.5 million bond payment, which has reached the end of its grace period, but it has warned it might not.
At a time of slowing property sales in China, a disorderly Evergrande default could cause financial stress in the property sector, said Logan Wright, director of China markets research for consultant Rhodium Group.
A resolution has to account for billions of yuan due to contractors and suppliers.
There is very little clarity on the potential sources of the funding, even if there is more confidence that authorities will respond with some resolution to limit financial contagion, Wright said.
Evergrande is back on the ledge after having narrowly avoided China's biggest default with 11th hour payments at the end of a grace period in the last couple of months.
The fallout has been broadly contained inside China and policy makers in Beijing becoming more vocal and markets more familiar, and the consequences of Evergrande's troubles will be less widely felt, according to investors.
Liqian Ren, a WisdomTree director who follows China, expects Evergrande to default.
She pointed out on Friday's central bank statement, and other official statements like it, that Evergrande was an individual issue and long-term funding functions would not suffer.
She said that a contagion happens when nobody knows who owns what, and events move quickly. She added that a default by Evergrande would look more like the case of HNA Group, whose restructuring plan was approved by creditors in October.
Tracy Chen, a fixed-income portfolio manager for Brandywine Global Investment Management, saw the broader risks of an Evergrande collapse as low.
It's very unlikely that the systemic risk is very unlikely and regulators have been doing a good job in making this what they call a limited detonation, said Chen.
China's central bank has pumped 1.2 trillion yuan $188 billion into the banking system, the second such move by its predecessor, https: www.reuters. Since July 2021 -- 07 -- 09 com business has said it is stepping in, and the regional government where Evergrande is based has said it is now stepping in.
The question for sector experts is whether this will prevent more contagion in China.
A clutch of Evergrande's smaller rivals have gone under or restructured since October's dodge. Kaisa, China's first property default in 2015 with $3 billion of debt to refinance next year, is in serious strife.
Seaport Global analyst Himanshu Porwal pointed out the string of smaller defaults and said nothing much has changed since October's Evergrande deadline.
It was positive that provincial governments wanted to get involved in cases like Evergrande's, but none of the state-owned property firms had taken part in the firm's projects to ease its liquidity crunch, he said. com gfx mkt akvezomgdpr Fitch 20 China 20 proper 20 and 20 land 20 sales. The damage inside the country continues to be done.
The HY bonds of China have suffered their worst year on record this year, losing more than a third of their value on average, while Evergrande, Kaisa and defaulters like Fantasia are down at least 80%.
There are 11 defaults this year, with land sales falling over 55% year-on- year, and housing sales are down 25% in October, more are expected.
It thinks Beijing needs to be more direct with its support.
The firm's head of Asia Corporate Research, Frank Pan, said that to prevent contagion cascading up the credit curve, regulators would need to think about stabilising both physical demand and financial markets.
If regulators fail to prevent wide-scale defaults within the sector, we could see more bonds trading at distressed levels, adding that even better quality firms could find it harder to refinance. Evergrande would be the second biggest EM corporate default, Evergrande would be the second biggest EM corporate default, https: graphics.reuters.