Evergrande crisis hit Japan’s toilet, air conditioner and paint makers

On Evergrande’s perceived risk of exposure, Toto lost 6.1% on Tuesday, extending its decline from Thursday to 14.8%, prompting investors fear that it could default on loan payments later this week.

“There are growing concerns about fund flows into China Evergrande Group, a leading local developer, whose business scale we know is one of TOTO’s major clients,” said Morgan Stanley analyst Arisa Katsuyama.

“Year-on-year loan defaults by real estate companies in China, not just China Evergrande, have already exceeded the cumulative figure for the past 10 years as tighter regulations cut,” he said, adding that investors should hedge the risk. Keep in mind Toto may have debt loss reserves to book.

China accounted for about 30% of Toto’s profits last year, but a spokesman for the firm said he could not comment on specific transactions, including whether there are deals with Evergrande.

Other potential suppliers to Chinese house builders and constructors also got caught in the scramble, with air-conditioner maker Daikin losing 4.7%.

About a quarter of Daikin’s air-conditioner sales in the last fiscal year came from China, compared to 13-16% in previous years.

Paint maker Nippon Paint Holding, for which China is by far the biggest market, fell 7.5%.

Manufacturers of construction machines, which have long benefited from the construction boom in China, also saw Komatsu fall 5.4% and Hitachi Construction Machinery by 5.5%.

Investors also left SoftBank Group, a major investor in Alibaba and other Chinese tech firms, out of fear that Beijing would continue to tighten its grip on them.

Shares of SoftBank Group fell 5.0% as US-listed Alibaba shares hit a two-year low on Monday.

Tomoichiro Kubota, senior strategist at Matsui Securities, said losses could spread further to companies if China’s slowdown becomes more pronounced.

“It seems that the Chinese authorities are cracking down on outright grandeur, which seems to have the backing of the Chinese public. It resembles something from the post-bubble era of Japan, when expensive home prices made the common people more vulnerable. was considered bad.”

While many Japanese firms rely on Chinese demand, Japanese institutional investors have relatively limited exposure to Chinese assets.

Japan’s largest investor, the Government Pension Investment Fund (GPIF), had an exposure of 9.673 billion yen ($88.31 million) in Evergrande as of March, 5.9 billion yen in bonds and 3.7 billion yen in stocks, compared to its 186.1 trillion yen ($1.70 trillion). ) was. properties.