Evergrande is not China’s Lehman moment

In breve

We believe the likely default of Evergrande will not have the same systemic impact as the Lehman bankruptcy. Read the full Market Commentary to explore our reasoning behind this view.


  • Evergrande has missed a coupon payment on an USD bonds this Thursday 23rd of September. It is now entering a 30- day grace period to potentially pay the amounts due, otherwise the coupon miss will trigger a technical default on the offshore debt. Sentiment is likely to remain weak until a solution emerges. Dollar bonds are currently pricing a 75% haircut, in line with a debt liquidation scenario while a debt reprofiling (maturity extension, debt to equity swaps) appears more likely to us and would imply higher bonds prices. 
  • Evergrande is not a Lehman moment: As much as we believe Evergrande’s equity and bondholders will bear the brunt of the burden, we view it as unlikely that this would trigger a global and systemic crisis, given the nature of its activities are less systemic than that of the financial sector. The amounts to be written-off look manageable. 
  • The Evergrande story adds to the risks of a sharper cooling of the real estate sector and the overall Chinese economy. Beijing’s introduced several policies to deleverage the real estate sector. The main tools are the “Three-Red-Lines” approach and lending caps by the PBoC. 
  • The Chinese government wants a/ credit risk to be better priced, b/ to cool down property speculation and prices and c/ protect homebuyers. But it wants to avoid a property crash that would reverberate through both households (wealth effect) and the financial system (bad loans) and make the crisis systemic. So, bond holders will bear some pain, but China will work hard on avoiding detrimental chain effects. 

Download the full report

Evergrande is not China’s Lehman moment

© Generali Investments, tutti i diritti riservati. Questo sito web è fornito da Generali Investments ed è considerato come una comunicazione di marketing e una promozione finanziaria riferita ai prodotti e servizi delle società elencate di seguito, appartenenti al Gruppo Generali: Generali Asset Management S.p.A. Società di gestione del risparmio & Generali Investments Luxembourg S.A. (nel prosieguo, congiuntamente indicate come Generali Investments). Inoltre, il sito può contenere comunicazioni di marketing e promozioni finanziarie di prodotti e servizi di società appartenenti alla piattaforma coordinata da Generali Asset Management S.p.A. Società di gestione del risparmio, nello specifico di Infranity, Sycomore Asset Management, Aperture Investors LLC., Plenisfer Investments SGR, Lumyna Investments, Sosteneo Infrastructure Partners SGR e Generali Real Estate S.p.A. Società di Gestione del Risparmio