China's debt distress becomes more evident in front of its foreign investors, as more signs of missing corporate stamps and mixed-up assets are discovered. Foreign investors may stop their transactions in the country if the bizarre happenings continue.
Bloomberg reported that 10 companies in China have been noted for their failure to issue payments this year. Protections in bond documentation as well as poor transparency of these companies have caused worry among investors.
"The internal corporate management of some companies is in chaos," said Wang Ying, one of the senior analysts at Fitch Ratings. "It's a typical phenomenon at an early stage of a bond market."
True enough, China Shanshui Cement Group Ltd. announced this May that the company could not dispense interest without their seal. However, a payment was reported later as the underwriter stated that the company stamp is not required.
Fosun International Ltd. is another case that showed bizarre defaults. The company reported that it cannot get in touch with their executives at the moment. In Dec. 2015, Caixin magazine wrote about the disappearance of Chairman Guo Guangchang. A day after, the company endured a crash worth $400 million. Currently, the bonds recuperated to 104.5 cents on the dollar.
A similar case with Fosun, Future Land Development Holdings Ltd. admitted in January that the Changzhou City authorities were investigating Chairman Wang Zhenhua.
"We do not want to be caught in a situation like Baoding Tianwei whereby assets were transferred out of the company without needing bondholders approval," said Aberdeen Asset Management's investment manager Edmund Goh. He believes that offshore investors of China have more protection compared to the country's onshore shareholders.
Meanwhile, senior analyst Liu Dongliang of China Merchants Bank Co. in Shenzhen said that the bond defaults were "erratic" and struck fear on China's investors. According to him, the ones who were defaulted did not essentially have the worst financial statuses.