Bond buyers blacklist some Chinese provinces after run of defaults

SHANGHAI (April 27): Investors are becoming more discerning when it comes to the origin of Chinese debt.

China saw its worst start to a year on record for corporate defaults, with companies headquartered in two eastern provinces -- Liaoning and Shandong -- responsible for the lion’s share. Money managers are taking notice, with a run of messy, high-profile company scandals helping sour sentiment toward certain regions. Beijing’s de-leveraging drive, which has been ramped up this month and has boosted borrowing costs, is also a factor.

“When the whole bond market is under pressure amid regulatory checks, investors would certainly want to sell those in risky regions first,” said Nie Wen, an economist at Huabao Trust Co. in Shanghai, which managed 557.5 billion yuan ($113 billion) at the end of 2015. “As the liquidity tide starts to ebb, it’s time to see who’s swimming naked.”

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