China’s distressed developers are increasingly asking local courts to drive their restructuring efforts, as weak home sales continue to weaken their ability to make headway or deliver on private debt workout plans. 

Chongqing Casin Property Development Group Co late last month became the newest among its peers to apply for the court to overhaul its debt. The move followed a Bloomberg News’ report that defaulter China Fortune Land Development Co is considering scrapping a creditor-approved debt plan for a court-led solution. 

Meantime, Jinke Property Group Co, the country’s first high-profile, listed delinquent builder to pursue this option, started a creditor vote on its relevant restructuring proposal earlier this week. The vote will end on March 31. 

The expanding list of Chinese developers seeking the court’s help is the latest sign of stress in a property debt crisis that’s entering its fifth year, as private debt talks become protracted and existing restructuring efforts suffer setbacks. While a court-driven process does present an alternative path for distressed firms, its success hinges on key factors including the introduction of cash-rich new investors.

“Court-led restructuring is the last resort for distressed companies,” said Qian Wenhan, a partner of Zhong Yin Law Firm, who specialises in restructuring and bankruptcies. “As China’s housing market has yet to notably stabilise, and some companies’ debt negotiations become lengthy or even hit an impasse, more developers are expected to use this approach to solve their predicament.”

The trend is also evident across industries as a slowdown in the world’s second-largest economy takes its toll. The number of Chinese listed companies seeking court-led restructuring rose to a six-year high of 29 last year, according to a report by Shanghai-based AllBright Law Offices. Nearly a quarter of them were from real estate or construction firms, it shows.

Court-supervised restructuring for developers in China remains a novelty, despite a record wave of defaults in the industry over recent years. Such an approach generally requires a procedure to place the company under bankruptcy administration, and may include white knights to bring in new funds. 

A growing number of Chinese developers also have ended up in court in Hong Kong since the crisis began, although it was predominantly the offshore creditors that applied to liquidate the defaulters’ business. At least seven such builders, including former industry behemoth China Evergrande Group, has received the court’s so-called winding-up rulings. 

To be sure, whether a local court will agree to drive a company’s restructuring depends on key conditions such as securing strategic investors who can inject new life into the debt-laden firm, lawyers and analysts say. 

While the sample pool in China remains too small to meaningfully analyse the impact of court-led restructuring on creditors and investors, the prolonged nature of the debt crisis has lowered the expectations for some. 

“Holders of public bonds can otherwise only live to see corporate assets depreciate over time,” said Ma Suiqing, a senior partner and fixed income investment director at Tensor Pacific Co, a Hangzhou-based hedge fund. “That’s why court-led restructuring of developers is clearly beneficial to most bondholders, as it at least offers some level of transparency and fairness.”

Source: Theedgemarkets

Trade: Directorate-General for Agri’s stance on trade creates challenges and opportunities

Key Highlights

USD/JPY declined heavily below the 151.50 support zone.

A key bearish trend line is forming with resistance at 151.25 on the 4-hour chart.

EUR/USD is eyeing a fresh move above the 1.0520 resistance zone.

GBP/USD could soon attempt a move toward the 1.2750 level.

USD/JPY Technical Analysis

The US Dollar started a major decline from well above 154.00 against the Japanese Yen. USD/JPY traded below the 152.50 and 151.50 support levels.

Looking at the 4-hour chart, the pair settled below the 150.50 support, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair even dived below the 150.00 level.

It is now showing many bearish signs. On the downside, immediate support sits near the 149.20 level. The next key support sits near the 148.80 level.

The main support could be 148.00. Any more losses could send the pair toward the 145.00 level. On the upside, the pair seems to be facing hurdles near the 150.50 level. The next major resistance is near the 151.20 level.

There is also a key bearish trend line forming with resistance at 151.25 on the same chart. The main resistance is now forming near the 151.50 zone.

A close above the 151.50 level could set the tone for another increase. In the stated case, the pair could even clear the 152.50 resistance.

Looking at EUR/USD, the pair remained stable above 1.0450 and might aim for more gains above the 1.0520 resistance.

Upcoming Economic Events:

Euro Zone Manufacturing PMI for Feb 2025 (Preliminary) – Forecast 47.0, versus 46.6 previous.

Euro Zone Services PMI for Feb 2025 (Preliminary) – Forecast 51.5, versus 51.3 previous.

US Manufacturing PMI for Feb 2025 (Preliminary) – Forecast 51.5, versus 51.2 previous.

US Services PMI for Feb 2025 (Preliminary) – Forecast 53.0, versus 52.9 previous.

Source: ACTIONFOREX

Japan's core consumer inflation hit 3.2% in January for its fastest pace in 19 months, data showed on Friday, reinforcing expectations that the central bank will keep raising interest rates from levels still seen as low.

Bond yields rose on the data, as markets factor in the chance that the Bank of Japan (BOJ) could hike interest rates more aggressively than initially thought, as inflationary pressure mounts.

The year-on-year increase in the core consumer price index (CPI), which excludes fresh food prices, slightly exceeded a median market forecast for a gain of 3.1% and followed December's rise of 3.0%.

"While services inflation isn't accelerating that much, goods inflation isn't slowing either," said Ryosuke Katagi, market economist at Mizuho Securities.

"The BOJ will likely see scope to raise interest rates, on the view price conditions are moving in line with its forecast."

A separate index stripping out costs of both fresh food and fuel, which is closely watched by the BOJ as a better gauge of demand-driven inflation, rose 2.5% in January from a year earlier, the data showed.

It was the fastest year-on-year pace since March 2024, when the index rose 2.9%.

The two-year Japanese government bond (JGB) yield rose 1.0 basis point (bps) from Wednesday to stand at 0.830% after the data, for its highest level since October 2008.

For nearly three years, inflation has exceeded the central bank's target of 2%, underlining rising inflationary pressure that has prompted hawkish remarks from BOJ policymakers, such as Wednesday's comments by board member Hajime Takata.

The BOJ raised its short-term interest rate to 0.5%, from 0.25% in January, reflecting its conviction that Japan was making progress in sustainably achieving its inflation target of 2%.

BOJ governor Kazuo Ueda has signalled his readiness to keep raising rates if wages continue to increase and underpin consumption, thereby allowing firms to keep hiking pay.

The BOJ has said solid wage growth will prod service-sector firms to pass on rising labour costs, and replace rising raw material prices as the key driver of inflation in Japan.

But stubbornly high prices of fuel and food throw into doubt the chance that cost-push pressure will dissipate. In January, households still battled soaring prices of rice, vegetables and other food, as well as a 10.8% hike in energy costs.

Headline consumer inflation, including fresh food prices, hit 4.0% in January, accelerating from 3.6% the previous month, and standing at their highest in two years.

By contrast, services inflation rose 1.4% in January from the previous year, slowing from a gain of 1.6% in December, the CPI data showed.

Japan's economy expanded an annualised 2.8% in the final quarter of last year on robust business expenditure and consumption, shoring up the BOJ's case for more rate hikes.

A majority of economists polled by Reuters expect the BOJ to hike rates once more this year, most probably during the third quarter, to 0.75%.

Source: Theedgemarkets