China CDS rise on mounting China Huarong concerns

By Rodrigo Campos

NEW YORK, April 14 (Reuters) - The cost of insurance against a default in China's dollar debt rose on Wednesday to its highest since October, on lingering concern over the effects of China Huarong Asset Management's delay in reporting its results.

Huarong, a manager of non-performing loans set up by the government two decades ago, saw its Hong Kong shares suspended since March 31 after it announced a delay in its earnings report due to a "relevant transaction" yet to be finalized.

China 5-year credit default swaps jumped by 4 basis points on Wednesday to 44 bps, the highest since October, data from IHS Markit showed. The CDS closed at 36 bps a week ago.

"It's all related to what's happening with Huarong," said Shamaila Khan, head of emerging market debt strategies at AllianceBernstein in New York.

"It is a systemically important institution in China. Any restructuring there would have a ripple effect across the entire space," she said, referring to all dollar-denominated Chinese debt.

Huarong and its subsidiaries currently have outstanding foreign-currency denominated bonds worth over $22 billion, according to Refinitiv data.

For instance, the yield on a February 2030 bond of Huarong's subsidiary's Huarong Finance 2019 Co rose from just below 5% a week ago to over 10% on Wednesday according to Refinitiv data.

Earlier this week credit rating agencies Moody's and Fitch said they are reviewing Huarong's ratings for a possible downgrade. Moody's said the details of the "relevant transaction" remain unclear, as well as a date for the company's results to be published.

Huarong could not be reached out of regular Chinese business hours. (Reporting by Rodrigo Campos; editing by Cynthia Osterman)