Chinas Evergrande is on the brink of default

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China’s embattled developer Evergrande is on the brink of default. Here’s why it matters

KEY POINTS

Snowed under its crushing debt of $300 billion, Evergrande is so huge that the fallout from any failure could hurt not just China’s economy. Contagion could spread to markets beyond China.

Here’s how big Evergrande is, how bad its debt problems are, and what’s next.

"Evergrande’s collapse would be the biggest test that China’s financial system has faced in years."
Mark Williams
CAPITAL ECONOMICS, CHIEF ASIA ECONOMIST
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https://www.cnbc.com/2021/09/17/chi...t-crisis-bond-default-and-investor-risks.html
 
Been a long time coming. I always wondered how many properties/cities are sitting empty in China. Maybe some upcoming news reports will show how much of an empty shell the country has become.

The worry here is how many credit swaps are involved from US banks and family offices. Forced selling today being caused by the unwind.
 
The global economy could feel the effects of China’s Evergrande crisis. Here’s what investors should know

KEY POINTS

Chinese officials are expected to stem the spillover from liquidity issues at Evergrande, the country’s largest property developer, before it slams the banking system and bleeds into foreign financial centers.

But strategists also say Beijing needs to act quickly to restructure Evergrande, because markets are becoming nervous and it is hurting sentiment.

The problems at the property developer could damage China’s economy and from there also dent the world economy.
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https://www.cnbc.com/2021/09/20/chi...-could-inflict-pain-on-the-world-economy.html
 
"Don't worry, nobody is exposed". (as the rats flee the barn). Old news and much is already factored in as UBS is down over 8% in the past two days.

Fund giant BlackRock and investment banks HSBC and UBS were among the largest buyers of the debt of embattled Chinese real estate developer Evergrande Inc, Morningstar data shows.
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https://www.reuters.com/article/usa-funds-evergrande-bonds-idUSL1N2QN1XR

There are also other companies going into contagion over China policy and I don't think China will be the big rescuer like everyone is hoping will happen. Xi would be admitting to a mistake in his recent swoon of authoritarian policies if China openly saved Evergrande.

Bottom line - it's a problem, and everybody is trying to downplay it.
 
This story is far from over.

What is Evergrande selling to produce cash? No matter what they're selling, it's deflationary. Nobody is paying top dollar for those empty apartments or piles of aluminum and steel for construction. All we've heard over the past ten years is China has been stockpiling commodities and that bubble looks ready to deflate.
 
No bailout. Does it matter? Nobody knows what the systemic risks will be in a connected global economy, but again, everyone is downplaying by saying it's a buying opportunity. Markets hit the 50 DMA, it's a buying opportunity. Market goes past the 50 and all of a sudden the 100 DMA matters and that's a buy signal.

The Evergrande collapse will exert deflationary pressures on all commodities. This is a good thing for the rest of the world. China is showing cracks in their foundation. This is also a good thing for the rest of the world.

Chinese authorities are asking local governments to prepare for the potential downfall of China Evergrande Group according to officials familiar with the discussions, signaling a reluctance to bail out the debt-saddled property developer while bracing for any economic and social fallout from the company’s travails.

The officials characterized the actions being ordered as “getting ready for the possible storm,” saying that local-level government agencies and state-owned enterprises have been instructed to step in only at the last minute should Evergrande fail to manage its affairs in an orderly fashion.
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https://www.wsj.com/articles/china-makes-preparations-for-evergrandes-demise-11632391852
 
Auditors giving failed business models a passing grade. Where have we seen this before?

I still say this is a bigger problem than everyone wants to admit, mainly because of lack of disclosure and the attitude of just buy every dip no matter what.

Last year as China Evergrande Group’s stock and bond prices seesawed, it offered deep discounts to keep sales growing during the pandemic and the government effectively said it had borrowed too much.

Yet the property developer’s auditor gave it a clean bill of health in an annual report issued this spring.

Now, Evergrande is teetering on the edge of financial collapse.
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https://www.wsj.com/articles/china-...or-warning-despite-big-debt-load-11632475800?
 
Evergrande

China Evergrande Group missed the deadline to pay its $83.5 million in coupon payment on dollar bonds with a face value of $2.03 billion to global investors, the Wall Street Journal reported on Friday. However, the report noted that the bondholders didn't receive any money and now a 30-day grace period is in effect, with Evergrande still being able to deliver on its payments, after which bondholders can call a default.

https://www.teletrader.com/news/details/56422947?internal=1&ts=1632501168732

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I bought GDX this morning because the chart looks close to making a low and sold it for a small profit because of the ugly weekly candle. Also dollar stuck at the 200 WMA. Gold will get smoked if it breaks through.

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I wish we could get the uncertainty (Evergrande bankruptcy, .gov shutdown, tapering, etc.) over with so I can buy and hold something.
 

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Re: Evergrande

How long until people on reddit start buying Evergrande because the price is "so low"? It "only" needs to gain 30 cents for a 100% gain.

:rolleyes:
 
Re: Evergrande

way back when I did some out of country travel, I saw for myself first hand the empty skyscraper apartment buildings in Beijing-very few lights on in windows in the evening as we passed through the city enroute to somewhere. One of my travel associates who grew up there but hadn't been back in awhile, remarked how fast and how well the economy there was doing compared to the last time they had been there. I think I began wondering then, read enough in the years since to know how false the growth image has been. It has to topple sometime. just like here, if for slightly different reasons at this point.
 
Re: Evergrande

So much for the buy the dip opportunity. Today's close in the S&P 500 was right at the "Evergrande Low" around 4305.

China is in a recession and Europe is struggling to secure energy for the upcoming winter because the renewable experiment is failing badly.
 
Re: Evergrande

China Evergrande Says Work on Some Residential Projects Has Resumed

Developer posted photographs showing workers on the job in cities including Shenzhen, Dongguan and Zhongshan

The developer didn’t detail how it was able to restart the projects or finance the work. In August, Evergrande said construction at a number of sites was halted after it delayed payments to suppliers and contractors, and that it was trying to get them to resume work. In some cases, it was paying suppliers with unfinished apartments.
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https://www.wsj.com/articles/china-...a7mnicgg8fq&reflink=desktopwebshare_permalink
 
Re: Evergrande

During the housing meltdown, there were clear warnings in hindsight years before it happened.

Fast forward to today and the cheerleaders told us 48 hours after the news broke that, "It's a China problem, it won't affect global markets." I thought it was a global economy? Anyway, just because "markets were up" a few days later, doesn't mean it's over.

China Evergrande has got a demand under a $260 million guarantee obligation, the company said on Friday, adding it may be unable to repay due to a liquidity crisis that has gripped China's property sector.
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https://www.reuters.com/markets/rat...nde-gets-260-mln-guarantee-demand-2021-12-03/
 
Re: Evergrande

Evergrande downgrade forces BlackRock and other institutions to write-off billions

After Fitch Ratings downgraded China Evergrande and some of its subsidiaries to “Restricted Default” status on Thursday, there was for the first time, widespread acknowledgement of the Chinese property giant’s failure to meet its debt obligations.

“The downgrades reflect the non-payment of coupons due 6 November 2021 for Tianji’s USD645 million 13% bonds and USD590 million 13.75% bonds after the grace period lapsed on 6 December.

What’s next for China Evergrande?

While Evergrande has officially been labelled a defaulter by one of the world’s most respected and most powerful ratings agencies, the company is yet to default in any offical legal sense.

From here, if Evergrande’s directors respect and acknowledge Fitch Ratings’ view, the next step would be for them to file for insolvency, which would see the company liquidated.
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https://www.asiamarkets.com/evergra...and-other-institutions-to-write-off-billions/
 
Re: Evergrande

"Evergrande doesn't matter." - Said most people on the internet.

Goodbye March 2020 lows in FXI.

fxi3.png
 
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