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MarketScreener Homepage  >  Equities  >  Hong Kong Stock Exchange  >  Bank of China Limited    3988   CNE1000001Z5

BANK OF CHINA LIMITED

(3988)
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China corporate spreads surge on state firm defaults

11/27/2020 | 02:33am EST

SHANGHAI (Reuters) - The premium paid by lower-rated Chinese corporate issuers over their higher-rated equivalents is set for its biggest monthly gain in nearly six years as a string of missed payments by state-owned firms continues to roil the domestic bond market.

The spread between the benchmark AA rated one-year commercial paper yield quoted by China Central Depository & Clearing Co over AAA debt has widened by nearly 100 basis points this month, as investors demanded higher yields for holding riskier paper.

That puts it firmly on track for the second-biggest monthly widening on record and the biggest since December 2014.

Missed debt repayments by several Chinese state-owned enterprises led to a corporate bond sell-off this month and heightened speculation that Beijing is resuming a long-running deleveraging campaign.

In its third-quarter monetary policy implementation report released on Thursday, the People's Bank of China said it would improve bond default risk prevention and disposal mechanisms.

That followed a meeting of the Financial Stability and Development Committee, chaired by Vice Premier Liu He, that vowed "zero tolerance" for market misconduct in the wake of the defaults.

But Thomas Gatley, China corporate analyst at Gavekal, said that widening spreads would not necessarily translate into more effective risk pricing in the market in the medium-term.

A rash of private sector bond defaults in 2017 led to investors shunning riskier names altogether in favour of the safest credits, he said.

"I suspect that that's what we'll see this time too, that probably marginal local issuers will struggle to issue at all."

"What we don't get is a broad market where all kinds of issuers can issue and they are differentiated by price ... What we get instead is just they're squeezed out and the bigger firms keep issuing, and there isn't much change to the pricing mechanism."

(Reporting by Andrew Galbraith; Editing by Ana Nicolaci da Costa)


© Reuters 2020
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Financials
Sales 2020 570 B 87 976 M 87 976 M
Net income 2020 172 B 26 471 M 26 471 M
Net Debt 2020 - - -
P/E ratio 2020 3,95x
Yield 2020 7,84%
Capitalization 858 B 132 B 132 B
Capi. / Sales 2020 1,50x
Capi. / Sales 2021 1,42x
Nbr of Employees 309 384
Free-Float 99,0%
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Technical analysis trends BANK OF CHINA LIMITED
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Mean consensus OUTPERFORM
Number of Analysts 19
Average target price 2,96 CNY
Last Close Price 2,27 CNY
Spread / Highest target 72,7%
Spread / Average Target 30,6%
Spread / Lowest Target 0,63%
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Managers and Directors
NameTitle
Jiang Wang Vice Chairman & President
Xi Quan Wang Chairman-Supervisory Board
Lian Ge Liu Chairman
Liu Qiuwan Chief Information Officer
Chang Yun Wang Independent Non-Executive Director
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