Case Study Of Xiangeqing Corporate Bond Defaults

Chinese economy is currently in the new normal period of the three period superimposed.The government is actively promoting the supply-side reform, and the release of credit risk is accelerating. After many years’ rapid development of the bond market, issuers are more and more diversity, and high-yield bond market has attained certain scale. In the context of the economic downturn, firms’ cash flows are deteriorating at the Micro-level and the credit risks get constantly exposed.By the end of 2015, 10 default cases of public offering bond have appeared in Chinese bond market, and the investment risk of credit debt has risen sharply.The intensification of market volatility and the appearance of default bring greater risk to the bond investment, and Xiangeqing corporate bonds become the first case of principal default on public offering bond in China’s bond market.This paper bases on this case to study and research the credit risk, credit analysis and investment strategies of Chinese high-yield bonds. First, understand the background of the current high-yield debt investment by the study of the history and characteristics of Chinese high-yield bond market. Second, reveal the real reason of the company’s non-compliance by reviewing and combing the details of the evolvement of Xiangeqing company bond default, and in-depth analysis of the company’ industry environment, business operations and financial condition. On this basis,the authors propose a credit analysis in the framework of the cash flows to address issues of avoiding credit risk and searching for excess returns in the bond investment. Meantime, present a solution by the combination of the swing trading strategies and portfolio trading strategies from the perspective of bond investment. By the analysis of this case, the authors expect to provide reference for the bond market participants.