(Bloomberg) -- Perpetual dollar bonds sold by several Hong Kong-based companies have suffered record declines in recent weeks, a sign of contagion from China's property sector woes.
Notes guaranteed by New World Development Co. fell as much as 17 cents last week, setting record declines, and are off about 10 cents further this week, according to prices compiled by Bloomberg. One note hit record lows Friday while others are near November's bottom. Perpetuals backed by New World ā one of Hong Kong's most indebted real estate firms ā have lost 15% this week, the worst performer in a Bloomberg index of Asia high-yield dollar notes.
Price declines of other Hong Kong firms' perpetual bonds have accelerated in recent days. A note from fellow builder Hysan Development Co. has dropped 9 cents this week, on pace for its biggest-ever decrease. Supply chain firm Li & Fung Ltd.'s perpetual bond has lost 5.2 cents, set for its largest weekly decline since March 2020.
āThe offshore bond market contagion is spreading to the Hong Kong high-yield and non-rated bond market given their direct and indirect onshore property exposures,ā said Owen Gallimore, head of Asia-Pacific credit analysis at Deutsche Bank AG. āThe selloff is most keenly felt in the perpetuals given the smaller investor base for this product and subordination.ā
China's property woes haven't caused direct impact to Hong Kong's major developers. But builders are facing higher borrowing costs amid interest rate hikes, and sales for new residential units are at a 4-year low. Hong Kong's once-hot office market is also going through its worst downturn in years.
--With assistance from Alice Huang and Pearl Liu.
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