Bonds In Conversation : Herald The First Default

What a way to start a new year, with our first default headline out of Kaisa Group over a small loan of $51.6 mio after the resignation of their chairman.

(Bloomberg) — Bonds of Kaisa Group Holdings Ltd., a developer based in the southern Chinese city of Shenzhen, plunged to record lows after the resignation of its chairman triggered a default on one of its loans.
The developer’s $800 million of 8.875 percent notes due 2018 and sold to investors at par in March 2013 tumbled to 41 cents on the dollar as of 1:05 p.m. in Hong Kong, from 66.263 cents on Dec. 31, sending yields to 45.6 percent. Kaisa was unable to repay a HK$400 million ($51.6 million) loan from HSBC Holdings Plc on Dec. 31, a deadline triggered by the resignation of Chairman Kwok Ying Shing, the developer said in a Hong Kong stock exchange filing yesterday.
KAISAG 6.875% 16    34.000-38.000
KAISAG 12.875% 17   42.000-46.000
KAISAG 8.875% 18    36.000-40.000
KAISAG 9 %   19     37.000-41.000
KAISAG 10.25% 20   35.000-39.000
This follows the Agile scare we had just 2 months back and serves as a severe warning to investors (mainly private banks) of the risks of USD offshore debt that cannot be repaid in times of crisis.
Some banks estimate the recovery value at 30-40% based on their last financials but also hasten to assure clients that the risks of contagion is low.
We are heading into the new year on a shaky front with only the confidence in the US to save our skins even as Chinese equities approach a 5 year high today.
For Europe is shaky although the media is now starting to paint anti Euro Greek party, Syriza, as a positive for investors should they gain power. Meanwhile Russia triples their bank bailout funds as Fitch revises the outlooks for 20 Russian banks to negative.
Stock markets have opted to shut out the negative which makes sense as the prospects of stimulus increases, or as in the case of the Fed, the expected hikes will be pushed back.
Singapore opens the year with a disappointing GDP number (+1.5% yoy vs expected 2.2%) which cascaded into a new 4 year high in the USDSGD at 1.3291 and the 6M SOR ascending 0.7327 (last high 0.75075 on 4 Jan 2010).
The bond market has been largely quiet as it has been for the past weeks, crippled into inaction on wide bid offer prices and the absence of bids, particularly for the higher yield local corporate names.
Sentiments are not hugely bullish after a nerve wracking 2014 where we saw the curve flatten massively and I would be underweight bonds still.
On this short note, I leave you with the indicative prices and wishing all a happy new year.
SGD 2014 Corporate Bonds
SGD 2013 Bonds