© Reuters. FILE PHOTO: Workers renovate a building of the Shanghai Exhibition Center in Shanghai, China May 27, 2021. REUTERS/Aly Song

LONDON (Reuters) – Emerging markets corporate default rates this year are expected to hit 10% for the first time since the financial crisis, analysts at U.S. investment bank JPMorgan (NYSE:) forecast in a note on Thursday.

The bank raised its emerging markets corporate high yield default forecast to 10.7% from 8.5% for 2022, the second hike in a year, due to the “continued deterioration in the China property space” and more Russian companies affected by “sanctions and/or technical default” due to the war.

“Notably the main contributor is unsurprisingly the China property segment where the default rate is expected to reach close to 40% this year,” added JPMorgan’s Alisa Meyers.

Lockdowns in Chinese cities due to the COVID-19 pandemic delivered a big blow to property sector liquidity. There have been so far 24 defaults or distressed exchanges in China for $41 billion.

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