(Bloomberg) — Investor concerns are shifting to China’s stronger property firms as a selloff across the industry’s dollar bonds turns to higher-quality borrowers. 

A dollar bond from China’s largest property firm by sales, Country Garden Holdings Co., fell 2 cents to 77.4 cents Monday morning after tumbling a record 10.3 last week. China Vanke Co., the nation’s second largest, also slid. After falling by 3.2 cents last Wednesday, a dollar note that was sold by one its units fell to 96.2 cents. This is the largest drop in value since March 2020. 

A clampdown on excessive leverage in the nation’s property sector and a debt crisis at Asia’s largest junk bond issuer China Evergrande Group had left investors focused almost entirely on lower-rated developers until recent days. But as concerns mount about the impact on the broader economy, the pressure has been spreading to the country’s biggest real estate companies. 

Lombard Odier’s head of Asian credit Dhiraj Bajaj said last week that there’s a risk of a systemic series of defaults in the property sector. 

The nonpayments of smaller companies that are less risky to financial markets have been restricted to this point. But fears about rising stress at Kaisa Group Holdings Ltd., China’s third-largest dollar debt borrower among developers, have reignited concerns that the credit crunch that began with Evergrande is becoming harder to contain.

With contagion risks now affecting China’s largest and higher-rated property firms, some investors see better value in weaker companies that offer the potential for bigger rewards. 

Even as overall prices remain at distressed levels, some bonds sold by China’s weaker property firms have been bouncing back some. An Evergrande unit’s 13% dollar note due 2022 that had a coupon due Saturday is indicated at 22.5 after rising 4.7 cents over the previous two weeks. Yango Justice International Ltd.’s bond due 2022 is at 25.4 cents after climbing about 3.7 cents through the end of last week. 

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