Evergrande, the Chinese real estate giant in the debt crisis, could not make the coupon payment of the 2 dollar bond.
The real estate company has recently focused on delivering homes and paying employee wages.
Due to Evergrande's failure to make its payments, international credit rating agencies downgraded the company's credit rating to limited default.
The index, which Bloomberg tracks Chinese real estate companies, dropped 2.2 percent today, the biggest drop since December 20.
China Aoyuan Group fell 10 percent, while Evergrande reversed its 7.4 percent gain in Hong Kong. Evergrande shares are down 89 percent this year.
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