China Evergrande Collapse

[TOM4CWB]

Now China developer Kaisa has missed a major debt payment. Kaisa apparently has more international debt exposure than Evergrande. Definately heightened global contagion risk (IMO).

These developer defaults feel like a slow moving car crash . . . .

I see China sovereignly started issuing $B's of US currency Bonds, now has switched to $B's of EU currency; causing disruptions in the Bond market forcing rates down..

...WSJ "China Plans to Sell Euro Bonds
China is preparing to sell euro-denominated bonds, weeks after it raised $4 billion in dollar bonds at cheap rates despite slowing economic growth."

The spat in the South China Sea... now the US sending a destroyer and another ship with NATO fanfair and blessing into the Black Sea.. shows an escalation of military tension globally, China making drones out of old Migs....

The lack of RUSSIAN and CHINESE participation in COP26 further is disrupting relationships...

Cheers

[TOM4CWB]

I see China sovereignly started issuing $B's of US currency Bonds, now has switched to $B's of EU currency; causing disruptions in the Bond market forcing rates down...

The spat in the South China Sea... now the US sending a destroyer and another ship with NATO fanfair and blessing into the Black Sea.. shows an escalation of military tension globally, China making drones out of old Migs....

The lack of RUSSIAN and CHINESE participation in COP26 further is disrupting relationships...

Cheers

Mystery of China’s Huge Dollar Surplus Baffles Global Markets



1 / 4
Mystery of China’s Huge Dollar Surplus Baffles Global Markets
Enda Curran
Thu, November 4, 2021, 2:00 PM
(Bloomberg) -- Unprecedented trade surpluses and record inflows into its bond market are giving China a stockpile of dollars unseen since the days when the ‘Asian savings glut’ was blamed for keeping U.S. interest rates excessively low and fueling the sub-prime mortgage crisis.

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But unlike then, when China aggressively recycled its dollar holdings into U.S. Treasuries, China’s giant pile of foreign exchange reserves are holding broadly stable. That means the dollars are being funneled somewhere else, but exactly where is proving to be a bit of a mystery.

While some of that flood of greenbacks is ending up as deposits at Chinese banks, the large ‘errors and omissions’ in the nation’s balance of payments is muddying the picture. What is clear is that the dollars offer China an important cushion against any future shocks in the world economy, even as individual companies like China Evergrande Group struggle to repay their debts.

“It is exceedingly difficult to get a clear view of how China’s current account surplus is recycled,” said Alvin Tan, head of Asia foreign exchange strategy at RBC Capital Markets in Hong Kong. Nonetheless, the dollars mean that “whatever China’s economic challenges ahead, there is little danger of either a balance of payments or a foreign debt problem.”

Foreign currency bank deposits are just shy of a record $1 trillion while the trade surplus in the first nine months of this year hit about $440 billion compared with the 2015-2019 average of $336 billion and 2020’s $325 billion, according to Morgan Stanley estimates.

At the same time, an aggressive Covid-zero policy has shuttered the nation’s borders and kept millions of Chinese tourists, and their savings, at home.

Some analysts argue that the booming current account has allowed China’s policy makers to rein in massive amounts of debt and begin a long-awaited campaign to deleverage its troubled real estate sector this year. But that leaves a question as to whether America’s demand for goods will keep up enough momentum to offset the effects of China’s slower credit growth. ...

WSJ: "U.K. Rate-Decision Surprise Ripples Across Global Bond Markets
The Bank of England holds fire on an interest-rate move, triggering the biggest U.K. bond-yield drop in years...Streetwise: Bond Markets Flash Turmoil, and No One Else Much Cares...The vast infusion of money by governments and central banks into the economy may have euthanized investors.94 min read
Heard on the Street: Central Banks Are Fighting Themselves, Not Markets
U.K. Rate Decision Ripples Across Bond Markets

Kaisa Group: Missed payment triggers fresh China property fears
Published6 hours ago BBC
A construction site owned by Chinese property developer Kaisa Group in downtown Shanghai.
IMAGE SOURCE, REUTERS
Fresh concerns have been raised about China's property sector as Kaisa Group has become the latest developer to miss a payment to investors.
Kaisa said it was facing unprecedented pressure on its finances due to a challenging property market.
It comes as rival developer Evergrande Group is still reeling under the weight of more than $300bn (£222bn) of debt.
The crisis at Evergrande has triggered fears that its potential collapse could send shockwaves through global markets.
Meanwhile, Evergrande has sold a UK-based asset as it faces another payment deadline on Saturday.
Trading in shares of Kaisa Group and three of its units was halted in Hong Kong on Friday, after one of its businesses missed a payment on a wealth management product.
Friday's filing to the Hong Kong stock exchange did not give a reason for the trading suspension.
Before the suspension, Kaisa, which has a market value of about $1bn, saw its shares hit a record low on Thursday after falling by 15%.
The Shenzhen-based developer said on Thursday that it is facing unprecedented pressure on its finances due to a challenging property market and downgrades by rating agencies, which makes it more difficult for it to borrow money.
line


Cheers

[errolanderson]

Mystery of China’s Huge Dollar Surplus Baffles Global Markets



1 / 4
Mystery of China’s Huge Dollar Surplus Baffles Global Markets
Enda Curran
Thu, November 4, 2021, 2:00 PM
(Bloomberg) -- Unprecedented trade surpluses and record inflows into its bond market are giving China a stockpile of dollars unseen since the days when the ‘Asian savings glut’ was blamed for keeping U.S. interest rates excessively low and fueling the sub-prime mortgage crisis.

Most Read from Bloomberg

China’s Climate Goals Hinge on a $440 Billion Nuclear Buildout

Results on Key Ballot Initiatives, From Policing to the Environment

Supply Chain Crisis Risks Taking the Global Economy Down With It

Atlanta’s Crowded Election Pits Former Mayor Versus ‘Anyone But’

‘Airbnb Queen’ Says She’s Caught Up in Platform’s New York Feud

But unlike then, when China aggressively recycled its dollar holdings into U.S. Treasuries, China’s giant pile of foreign exchange reserves are holding broadly stable. That means the dollars are being funneled somewhere else, but exactly where is proving to be a bit of a mystery.

While some of that flood of greenbacks is ending up as deposits at Chinese banks, the large ‘errors and omissions’ in the nation’s balance of payments is muddying the picture. What is clear is that the dollars offer China an important cushion against any future shocks in the world economy, even as individual companies like China Evergrande Group struggle to repay their debts.

“It is exceedingly difficult to get a clear view of how China’s current account surplus is recycled,” said Alvin Tan, head of Asia foreign exchange strategy at RBC Capital Markets in Hong Kong. Nonetheless, the dollars mean that “whatever China’s economic challenges ahead, there is little danger of either a balance of payments or a foreign debt problem.”

Foreign currency bank deposits are just shy of a record $1 trillion while the trade surplus in the first nine months of this year hit about $440 billion compared with the 2015-2019 average of $336 billion and 2020’s $325 billion, according to Morgan Stanley estimates.

At the same time, an aggressive Covid-zero policy has shuttered the nation’s borders and kept millions of Chinese tourists, and their savings, at home.

Some analysts argue that the booming current account has allowed China’s policy makers to rein in massive amounts of debt and begin a long-awaited campaign to deleverage its troubled real estate sector this year. But that leaves a question as to whether America’s demand for goods will keep up enough momentum to offset the effects of China’s slower credit growth. ...

WSJ: "U.K. Rate-Decision Surprise Ripples Across Global Bond Markets
The Bank of England holds fire on an interest-rate move, triggering the biggest U.K. bond-yield drop in years...Streetwise: Bond Markets Flash Turmoil, and No One Else Much Cares...The vast infusion of money by governments and central banks into the economy may have euthanized investors.94 min read
Heard on the Street: Central Banks Are Fighting Themselves, Not Markets
U.K. Rate Decision Ripples Across Bond Markets

Kaisa Group: Missed payment triggers fresh China property fears
Published6 hours ago BBC
A construction site owned by Chinese property developer Kaisa Group in downtown Shanghai.
IMAGE SOURCE, REUTERS
Fresh concerns have been raised about China's property sector as Kaisa Group has become the latest developer to miss a payment to investors.
Kaisa said it was facing unprecedented pressure on its finances due to a challenging property market.
It comes as rival developer Evergrande Group is still reeling under the weight of more than $300bn (£222bn) of debt.
The crisis at Evergrande has triggered fears that its potential collapse could send shockwaves through global markets.
Meanwhile, Evergrande has sold a UK-based asset as it faces another payment deadline on Saturday.
Trading in shares of Kaisa Group and three of its units was halted in Hong Kong on Friday, after one of its businesses missed a payment on a wealth management product.
Friday's filing to the Hong Kong stock exchange did not give a reason for the trading suspension.
Before the suspension, Kaisa, which has a market value of about $1bn, saw its shares hit a record low on Thursday after falling by 15%.
The Shenzhen-based developer said on Thursday that it is facing unprecedented pressure on its finances due to a challenging property market and downgrades by rating agencies, which makes it more difficult for it to borrow money.
line


Cheers

Thanks Tom, China is becoming more of a mystery.

Amazing that North American stock markets aren't backing off with this news. This is bearish commodities. Investors are definitely still in the fantasy of a central bank protected cocoon, lala land that nothing can go wrong when money printing has your back. Nothing can be further from the truth . . . .

[jazz]

Evergrande finally defaulted today and is moving to bankruptcy proceedings.

[ry0972]

This could be the start of some really BIG and BAD hits in the Chinese financials!!!
Or China does everything it can to contain it till after the Olympics??

[TOM4CWB]

Evergrande finally defaulted today and is moving to bankruptcy proceedings.

Not quite...

"WSJ: Chinese Developers Rally on Policy Hopes as Evergrande Again Averts Default
Central bank considers easing rules on leverage to help struggling developers sell off assets

A China Evergrande development on the outskirts of Nanjing.
PHOTO: QILAI SHEN/BLOOMBERG NEWS
By Frances Yoon and Quentin Webb
Updated Nov. 11, 2021 5:12 am ET


Stocks and bonds of Chinese developers jumped on signs that Beijing could moderate its tough stance on the beaten-down property sector, while industry heavyweight China Evergrande Group again averted default by making another set of last-minute bond payments.

On Thursday in Hong Kong, the Hang Seng Mainland Properties index gained 5.6%, building on a rally in the previous session. Some real-estate stocks surged more, with China Aoyuan Group Ltd. gaining 12% and China Vanke Co. jumping 6.7%."

Never doubt the Chinese capacity to save face and bolster its interests....

[errolanderson]

The poster child of China's property crisis China Evergrande Group was officially declared in default by credit rating agency S&P Global on Friday after the sprawling firm missed a bond payment earlier this month.

"We assess that China Evergrande Group and its offshore financing arm Tianji Holding Ltd. have failed to make coupon payments for their outstanding U.S.-dollar senior notes," S&P said in a statement.

No financial contagion into North America and Europe, they say (hope, wish, pray) . . . .