What’s new: Hong Kong-listed arms of two major Chinese financial institutions took a hit to their bottom lines last year as bond prices fell in a tumultuous market.
Bocom International Holdings Co. Ltd. reported an annual loss of HK$3 billion ($380 million), reversing a HK$312 million profit in 2021, the company said in a Monday filing to the Hong Kong Stock Exchange.
Bocom International’s profitability was partly hurt by proprietary trading in its asset management and advisory business, which reported a loss of HK$466 million due to “the guarantee fee payment to a client in accordance with asset management agreements,” according to the filing.
“In connection therewith, the group deployed its investment mostly in debt securities, the price of which plunged significantly in 2022,” it added.
Meanwhile, Guotai Junan International Holdings Ltd.’s profit last year slumped 92% to HK$83 million.
The company noted that “deepening default risk of bonds issued by (Chinese) mainland real estate corporates” had resulted in a year-on-year decline in coupon income from bonds in 2022, according to its filing to the exchange the same day.
The background: China’s real estate market has been in crisis since 2021 as policymakers vowed to rein in speculation and excessive borrowing, making it harder for property companies to repay debts.
That forced dozens of developers, including China Evergrande Group and Sunac China Holdings Ltd., to delay both onshore and offshore bond repayments or simply default, with investors selling off their stocks and high-yield bonds.
In 2022, Chinese developers defaulted on $30 billion of offshore bonds, three and half times the amount in 2021, according to a Jan. 9 report by GF Securities Co. Ltd.
Related: Chinese Developers Face $141 Billion Wall of Maturing Bonds in 2023
Contact reporter Zhang Ziyu (ziyuzhang@caixin.com) and editor Lin Jinbing (jinbinglin@caixin.com)
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