According to Reuters, citing JP Morgan, the combination of Russia’s war in Ukraine and China’s ongoing property slump could result in the greatest wave of corporate defaults since the global financial crisis.

JP Morgan mentioned that the main concern for Russian corporations would be a technical default due to potential payment restrictions. Currently, external bonds issued by Russian corporations total $99 billion.

In addition, defaults in Eastern Europe are expected to hit a record 21.1%, as Ukraine and Russia are expected to default at 98.8% and 27.3%, respectively, with businesses now struggling due to war or unprecedented sanctions in the West.

According to a new analysis released by the bank’s experts, the emerging market default rate is now forecasted to reach 8.5%, up from 3.9% as expected before the Ukraine conflict.

The volume of riskier ‘high-yield’ EM (emerging market) corporate foreign market bonds has reached $166 billion, the highest level since 2009.

Besides, the property sector in China will be facing more challenges as 29 struggling Chinese developers’ defaults are expected to total $32 billion. The default rate for the property sector would be 31%.

Combining the default rate with the $49 billion in defaults from 26 firms last year would mean that half of China’s high-yield property bonds have defaulted.

JP Morgan analysts said, “Together with a 30% default rate recorded last year, we could potentially see more than half of the sector being decimated.”

They also added, “While the government has gradually loosened its housing policies, some weaker developers have already gone beyond their tipping point.”

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