Higher defaults in coal, steel firms seen as China cuts capacity

HONG KONG: More companies in China's coal and steel sectors will likely fail as the nation takes further steps in supply-side reforms aimed at curbing overcapacity and excess labor in state-owned industries, according to analysts at Hua Chuang Securities Co and Nanjing Securities Co.

Investors should avoid putting money in weaker firms in the coal and steel sectors whose securities aren’t frequently traded, according to Yang Hao, a credit analyst at Nanjing Securities. Baotou Iron & Steel Group Co sold three billion yuan (US$456mil) of notes last week with a coupon of 5.15%, higher than the 4% level paid by similar bonds, he said.