Evergrande: The Beginning of China’s Economic Collapse?

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mannanman
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by mannanman »

So if those bond holders decide not to get a payment can they hold on to the bonds or is it a “Take it or leave it” scenario?
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by truffledog »

there will be a debt to equity swap and a government bailout..my bet... and Hai Jun Xia will dispappear from the public eye.
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Kammekor
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by Kammekor »

mannanman wrote: Mon Oct 04, 2021 3:38 pm So if those bond holders decide not to get a payment can they hold on to the bonds or is it a “Take it or leave it” scenario?
They can take or leave it or sell the bonds during the next pandemic as toilet paper.
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Re: Evergrande: The Beginning of China’s Economic Collapse?

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A missed bond payment by a Chinese developer has reignited investor angst about the health of the nation’s property sector.

Chinese junk dollar bonds were poised for their biggest selloff in at least eight years amid renewed concern that authorities will do little to alleviate the credit crisis gripping the industry. Yields are near a decade high.

Developer shares tumbled, with Sunac China Holdings and China Aoyuan Group falling at least 10 per cent. A gauge of Chinese stocks in Hong Kong closed at a five-year low. China Evergrande Group’s silence on a reported stake sale in a unit left its shares suspended.

Fantasia Holdings Group became the latest property company to fail to repay a maturing bond on Monday, while a series of rating downgrades from global risk assessors and a slump in US markets overnight added to investor jitters. Credit traders blamed thin volumes for the scale of the meltdown. Mainland China is closed for a week-long holiday, shutting off liquidity channels like stock links into Hong Kong and the central bank’s daily cash injections.

Fantasia’s missed payment “provides a clear sign that despite piecemeal bailouts of select Evergrande assets, property market stresses remain elevated,” said Craig Botham, chief China economist at Pantheon Macroeconomic. “The rot is unlikely to stop here.”

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Fantasia should pose a lesser risk to markets than Evergrande due to its smaller size. It ranked only 60th in a list of contracted sales in the first quarter of this year while Evergrande was third - and its $US12.9 billion ($18 billion) in total liabilities are dwarfed by Evergrande’s $US304.5 billion. Fantasia is also a less prolific bond issuer with about $US4.7 billion in outstanding offshore and local debt, Bloomberg-compiled data show. That compares to Evergrande’s $US27.6 billion.

The average price of China’s high-yield dollar bonds fell about 5 cents on the dollar Tuesday, with single B rated firms down as much as 10 cents, according to credit traders. Dollar bonds of Kaisa Group Holdings and Modern Land China were set for their biggest declines in at least a year, while a Central China Real Estate bond lost almost 11 cents on the dollar. A gauge tracking shares of mainland developers slumped 3.8 per cent.

The declines shattered a period of calm that had been spurred by speculation authorities would support the industry and limit damage to the economy. Chinese developer shares had rebounded 11 per cent in the previous five days - the longest gaining streak since March - after the central bank pledged to safeguard the real estate market and protect home buyers’ rights. The People’s Bank of China also added funds to the banking system for 10 straight days, pushing interbank borrowing costs lower.

The government is unlikely to ease its curbs on the property sector, despite the recent speculation, according to Nomura Holdings.

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“Beijing’s hawkish stance on the property sector remains intact,” Nomura analysts led by Ting Lu wrote in a note dated on Monday. “We expect Beijing to maintain its property-related tightening measures and a rapid weakening of the property sector to deal a severe blow to headline GDP growth and government revenue.”

The government has so far maintained strict rules that force indebted developers to reduce leverage, as well as measures aimed at preventing a bubble in home prices.

The result is refinancing debt is becoming increasingly difficult for the sector, with junk-rated or unrated real estate firms selling the least amount of notes in the third quarter since late 2017. At the same time, sales of homes are plunging. Major developers recorded a 30% drop in sales in September from a year earlier, Jefferies analysts said in a note, citing China Real Estate Information Corp data.

Fantasia failed to repay a $US205.7 million bond that was due on Monday, according to a company statement. Separately, Country Garden Services Holdings said that a unit of Fantasia didn’t repay a 700 million yuan loan that also came due on Monday and that a default was probable.

Beijing has pumped $US120 billion into its financial system in less than a fortnight while urging state-owned banks to lend more to property buyers and support the property sector but is yet to become directly involved in any attempt to rescue Evergrande.
Beijing has pumped $US120 billion into its financial system in less than a fortnight while urging state-owned banks to lend more to property buyers and support the property sector but is yet to become directly involved in any attempt to rescue Evergrande.CREDIT:AP

Evergrande - which is at the epicentre of investor concern- has yet to publish an update since halting shares pending an announcement on a “major transaction.” The company agreed to sell a majority stake in its property services unit to a Guangdong-based developer, Cailian reported on Monday, citing unidentified people. Last week, Evergrande agreed to sell a 20 per cent stake in Shengjing Bank Co. to the local government in a deal that S&P Global Ratings said marked the first step toward solving Evergrande’s liquidity crisis.

A Bloomberg index of Chinese real estate stocks is trading at less than 0.4 times book value. That shows stock traders are applying a significant discount to the value of assets held by Chinese developers -- near the largest in data going back to 2005.

Fifteen of the country’s most stressed property developers will have $US2.1 billion in bond payments due this month, according to calculations by Citigroup analysts, comprised mostly of coupons. The bill will more than double in January as principal payments come due, indicating market stress may reach another maximum around that time, the analysts wrote in a note.

https://www.smh.com.au/business/markets ... 58xix.html
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SternAAlbifrons
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by SternAAlbifrons »

mannanman wrote: Mon Oct 04, 2021 12:07 pm
SternAAlbifrons wrote: Mon Oct 04, 2021 5:08 am Evergrande: The Beginning of China’s Economic Collapse?

What a bunch of absolute horse shit.
Along with "We gonna wump them in the war. Bring it on, Sloppies"

ffs Get real.
Look at our financial situation - and the record of the West in war for the past 7o years.

'Any cool heads capable of realistic analysis out there?
I'm sick to death of all this mindless propaganda. Not just because it is so stupid - but because it looses us wars and will bankrupt our kids.

(tip - look at OUR bank statement, fellow Stupids)


:stir:
Not sure if you’re playing devils advocate but I think China (PRC) know exactly what they are doing.

Along with the Jews they’re top gold economists and very smart. Been like that for centuries.
Yeah, devils advocate - in a sense.
Don't get me wrong, the Evergrande problem is serious, the whole chinese real estate sector is a big worry - for everybody.

But conflating it with the collapse of China is ludicrous.
Conflating it with blind self righteous hatred - is down right dangerous.

The interpretations of the fiercely one eyed "patriots" are idiocies my friends and will lead us into catastrophe once again.

just my view
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by canucklhead »

Chinese property sector described as the biggest pozi scheme the world has ever seen.
Hows that doniker the Gold 42 project coming along?
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IraHayes
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by IraHayes »

I was reading the other day that another Chinese property developer has missed a bond payment too. While the missed payment is smaller than Evergrandes it shows the problem is not confined to just Evergrande but a problems that is endemic across the whole sector.
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by LoukBongThom »

canucklhead wrote: Sat Oct 09, 2021 12:52 pm Chinese property sector described as the biggest pozi scheme the world has ever seen.
The governments and municipalities have been reaping from this tremendously, as some of them have been relying heavily on proceeds from land auctioning to fund the governments. It was getting out of control so they put a brake on it with the 3 red lines, and that makes things falling apart even faster.
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by nemo »

The rescue of embattled Chinese property company Evergrande appears to have stalled, leaving the developer on the brink of default and threatening to unleash contagion through the country’s giant real estate sector, home prices and the economy.

The problems enveloping Evergrande, which has eyewatering total debts of $305bn, have hung over global financial markets in recent weeks and helped curb China’s post-pandemic recovery.

But the crisis could deepen further if Evergrande fails to meet a deadline of Saturday night to stump up a $83.5m bond interest payment, triggering an official default.

Evergrande has already been given a 30-day grace period to make the repayment after missing the initial deadline back in September. It has since missed other key offshore, dollar-denominated bond payments worth another $193.3m. The clock is now ticking on those debts as well.

First, Evergrande’s negotiations to sell its 51% stake in its profitable property management unit, Evergrande Property Services Group, to another Chinese developer for $2.6bn have been suspended, according to reports. The buyer, Hopson Development Holdings, reportedly could not obtain the necessary agreement from the provincial government in Guangdong, which is overseeing Evergrande’s restructuring.

The sale of Evergrande’s 26-storey waterfront headquarters in Hong Kong was expected to raise another $1.7bn but the deal with Yuexiu has also reportedly been placed on hold for the same reason.

The state of the property market, which accounts for about 25% of the Chinese economy, makes for an alarming backdrop to these problems. Home sales by value tumbled 16.9% in September from a year earlier, after a 19.7% drop in August, according to Bloomberg calculations based on official data released on Monday.

China’s corporate sector accounts for almost a third (31%) of global corporate debt, according a survey by S&P of 25,000 companies across the world. The sector’s debt-to-GDP leverage ratio of 159% is one of the world’s highest – the current global ratio is 101% – and presents a staggering $27tn headache for Beijing.

https://www.theguardian.com/business/20 ... line-looms
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by IraHayes »

All of the figures Bloomberg and the like are quoting are on the book figures. No one really knows what the off the book figures are.
And another figure I read was that Evergrande sales last month were down 92 or 93% on the same month last year.
I was going to post a day or 2 ago that the 23rd is going to be the crunch day. That's when, as you rightly point out, the Evergrande debt goes from delinquent to default. And the cancer is already spreading to a lot of other developers.

So...
we have a power supply problem
a property bubble of astronomical proportions
cracks in the 3 Gorges damn
food supply problems

After the Winter Olympics (or as one or 2 are predicting... during) I think Taiwan had better brace itself.
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