(Bloomberg) — A record selloff in Fosun International Ltd.’s dollar bonds shows that financial stress among China’s property developers is shifting to the country’s other weaker borrowers.

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In a sign of contagion, an extended slump in the Shanghai-based conglomerate’s dollar bonds is spreading to several Chinese industrial firms’ offshore debt Tuesday. Fosun’s dollar notes lost 21% last week, the most in a Bloomberg index of Chinese high-yield dollar bond, after Moody’s Investors Service put the firm on review for a downgrade.

Fosun didn’t immediately respond to an emailed request for comment.

The steep losses in Fosun’s bonds, alongside a fresh selloff in Macau’s casino operators, are pushing China’s junk dollar debt market into a new phase as broader risks in the world’s No. 2 economy begin hitting companies outside the property sector. The pressure on Fosun also is a reminder of the heavy economic toll that a two-month Covid lockdown took on businesses in Shanghai.

The selling in Fosun’s offshore bonds “is a reflection of broader wariness of potential downside in this current market environment, with many risks remaining unresolved in China and globally,” said Henry Loh, investment manager at abrdn Asia. “I’d imagine that the aggressive downward spiral experienced in Chinese real estate remains very fresh in investors’ minds so that will likely be a factor in many investors’ reaction.”

Moody’s said the firm’s tight cash flow is driving the credit assessor’s decision to put it on watch for downgrade. Fosun’s liquidity is “very weak at the holding company level” and insufficient to cover its short-term debt over the next 12 months, according to Moody’s analysts including Lina Choi. The conglomerate, co-founded by tycoon Guo Guangchang, has operations from pharmaceuticals to tourism and insurance.

Story continues

The credit rating firm also cited contagion risks from China’s real estate sector on Fosun’s property exposure, saying it expects Fosun to face challenges in accessing the bond market “amid onshore and offshore investors’ increasing risk aversion toward high-yield privately-owned companies with exposures to the property sector.”

How China’s Property Developers Got Into Such a Mess: QuickTake

(Updates with bond prices in the second paragraph and more details in the fifth)

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