(Bloomberg) -- The wild ride in an Indonesia textile maker’s dollar bonds is putting a spotlight on the risks that Asia junk bond buyers are taking.

Four months after a subsidiary of Indonesia’s Duniatex Group sold a $300 million bond, attracting over $1 billion of orders, that bond has plummeted, losing nearly 70 cents on the dollar this week. The stunning fall, prompted by a missed loan payment by another group subsidiary, has shocked bond investors.

The Indonesian firm’s slump also highlights risks that investors face as they buy into the region’s junk bond market, which has returned 10.6% so far this year, the most since 2016. Recent bond defaults out of China have raised concerns about the quality of financial reports. One defaulter, Chinese firm Kangde Xin Composite Material, was found to have faked profit, according to the nation’s stock market watchdog.

“Governance standards have to be stronger across the board for Asia high yield,” said Dhiraj Bajaj, portfolio manager at Lombard Odier. “Where quality standards are not met, investors should say no at any price.”

S&P cut its credit score on Delta Merlin Dunia Tekstil’s dollar bonds by six steps to CCC- this week, citing its “significant liquidity challenges.” The ongoing U.S.-China trade tensions are “significantly hurting” the Indonesian textile market, and Duniatex’s liquidity was affected by plummeting prices due to the oversupply of imported cheap fabric from China, S&P also said.

‘Don’t Call or Email’

The communication between the company and investors also highlights the difficulties bond buyers can face when things go sour.

There have been concerns about disclosure in recent defaults of unlisted companies including dollar bonds sold by CEFC Shanghai International Group and Reward Science and Technology Industry Group Co.

Neither Duniatex nor its subsidiary that sold the bond or the loan are listed.

An email sent from a Duniatex executive to an investor that was seen by Bloomberg News, said “We will try to ring fenced DMDT as the bond issuer” from a missed payment on a loan.

“We will update later, please dont call or email at this time, as my Inbox flooded with emails,” the email also said.

Calls to Duniatex went unanswered.

BNP Paribas SA and Standard Chartered Plc arranged the bond sold in March. A spokeswoman for Standard Chartered declined to comment, while a spokesman for BNP Paribas was unable to immediately comment.

“This event reminds us of potential problems outside of China as well, with a lack of disclosure for private companies,” said Raymond Chia, head of credit research for Asia excluding Japan at Schroder Investment Management Ltd.

--With assistance from Tassia Sipahutar.

To contact the reporter on this story: Denise Wee in Hong Kong at dwee10@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Finbarr Flynn

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