China's Evergrande Group crisis

[greggles]

Evergrande shares have been suspended from trading in Hong Kong after bondholders said the company has missed interest payments.

Evergrande: Company set to update market on 'major transaction'

It comes as a China media report says a rival firm is set to buy a big stake in an Evergrande unit.

www.bbc.com

Looks like the asset fire sale isn't managing to generate enough cash to get Evergrande out of trouble. Can anyone else hear the air getting let out of China's property market?

 

[aus_trader]

Evergrande shares have been suspended from trading in Hong Kong after bondholders said the company has missed interest payments.

Evergrande: Company set to update market on 'major transaction'

It comes as a China media report says a rival firm is set to buy a big stake in an Evergrande unit.

www.bbc.com

Looks like the asset fire sale isn't managing to generate enough cash to get Evergrande out of trouble. Can anyone else hear the air getting let out of China's property market?

Looks like it's badly in need of a CCP bailout if it's to continue the business.

 

[over9k]

Share trading has just been suspended. Lol.

This is not going to get better.

 

[againsthegrain]

Share trading has just been suspended. Lol.

This is not going to get better.

Yeah where is that guy who was thinking to "buy the dip" ... hopefully he didn't

 

[aus_trader]

Yeah where is that guy who was thinking to "buy the dip" ... hopefully he didn't

Agree, even buying the last little rally would look like a mistake now...

 

[moXJO]

Distressed developer China Evergrande will sell a half-stake in its property management unit to Hopson Development for more than $5 billion, Chinese media said on Monday, after both Evergrande and Hopson requested trading halts ahead of a major transaction.

https://m.economictimes.com/news/in...&utm_campaign=cppst&__twitter_impression=true

Bit of FUD at the moment. I don't see the ccp letting this get out of control. At most they might want to attempt to tank foreign markets.

 

[over9k]

Distressed developer China Evergrande will sell a half-stake in its property management unit to Hopson Development for more than $5 billion, Chinese media said on Monday, after both Evergrande and Hopson requested trading halts ahead of a major transaction.

https://m.economictimes.com/news/in...&utm_campaign=cppst&__twitter_impression=true

Bit of FUD at the moment. I don't see the ccp letting this get out of control. At most they might want to attempt to tank foreign markets.

Problem is, they know that the more bailouts they give, the more reckless the companies will be.

Bit of a jam they're in, isn't it?

 

[e_abrams]

This is an absolute mess. I'm just baffled that they let it get this bad before doing anything about it.

 

[over9k]

The virus has played merry hell with stuff like this. Have you seen the housing markets in the west lately?

This wouldn't have been nearly as bad if not for the virus (and more to the point, the response to the virus).


The same piper is going to have to be paid in the west too, it just appears that someone else will be the first domino to fall.

 

[aus_trader]

Problem is, they know that the more bailouts they give, the more reckless the companies will be.

Bit of a jam they're in, isn't it?

Very insightful, would China follow the US ?

It's the case with the US zombie companies doing whatever they like (since they found the holy grail of the sin pardon i.e. rescue) taking on mountains of debt never ever worrying about paying any of it back. Not a care or a worry in the world when everything is backstopped and/or bailed out by the FED.

 

[moXJO]

Problem is, they know that the more bailouts they give, the more reckless the companies will be.

Bit of a jam they're in, isn't it?

China just disappears some CEOs or takes all their and their families money.

 

[qldfrog]

China just disappears some CEOs or takes all their and their families money.

or? and with a bullet in the head if you become too much of a trouble

 

[moXJO]

or? and with a bullet in the head if you become too much of a trouble

Yeah they don't mess around.

 

[e_abrams]

That won't fix the company's debt, however. Unless the state just declares it null and void. Who knows what they'd do. ?‍

 

[Smurf1976]

It seems Evergrande might not be the only one.

A mid-sized Chinese real estate developer has failed to make a $282 million payment due to bondholders

Fantasia Holdings is not the size of Evergrande Group but it has missed a huge payment and asked for a halt to trading

Chinese real estate developer Fantasia Holdings Group fails to make a $280 million payment due to bondholders, adding to worries over the country's property sector as Evergrande teeters on the brink of collapse.

www.abc.net.au

I've nothing much to add other than to note that what I call "mouse theory" is probably applicable here.

Mouse theory = if you've seen one, be assured there's plenty more not far away.

 

[over9k]

That won't fix the company's debt, however. Unless the state just declares it null and void. Who knows what they'd do. ?‍

State takeover/nationalisation of the company. Creditors get paid, directors get gulag'd.

 

[over9k]

Here's the next domino:

 

[aus_trader]

That won't fix the company's debt, however. Unless the state just declares it null and void. Who knows what they'd do. ?‍

I've also read in various sources that China is more likely to think of it's national interest and if there is a bailout it'll be more like the nationalisation of the company and assets (unbuilt or partly built apartments) that @over9k mentioned.

It's possible, but I fear only the local creditors and apartment depositors are likely beneficiaries:

• Local creditors (Chinese state owned banks for e.g.) will get all or some (could be a haircut) of their money back
• The Chinese citizens who are about to jump off the apartment towers fearing they've lost their life savings will be re-assured that their investment will be saved via their apartment built to completion.

However the overseas creditors may lose out in such a deal, so there could be some write-downs outside of China e.g. in Global funds etc. If it's Evergrande write-down only, the funds may be able to save their balance sheet. But what if there are more mice in the field as per @Smurf1976's comment ?

 

[over9k]

Yeah, when lehmann brothers went and the rest of the hedge funds were looking like then falling like domino's they were seriously considering getting the retail banks like JPM etc to absorb them but then realised that would essentially have the retail banking sector absorb the entire investment bank/hedge fund sector. It would have saved the investment banks but at the cost of creating absolute leviathans that controlled both the entire retail sector as well as investment banking as well.

Nationalisation was politically impossible/absolute anathema (because government control/ownership of anything would be communism) and actually sending the scumbags to jail etc even more so, so the only alternative was to literally give them bailouts (the money they lost) that they then paid themselves bonuses with.


So I'm actually all for china's approach to this sort of thing.

 

[greggles]

It seems Evergrande might not be the only one.

Fantasia Holdings is not the size of Evergrande Group but it has missed a huge payment and asked for a halt to trading

Chinese real estate developer Fantasia Holdings Group fails to make a $280 million payment due to bondholders, adding to worries over the country's property sector as Evergrande teeters on the brink of collapse.

www.abc.net.au

I've nothing much to add other than to note that what I call "mouse theory" is probably applicable here.

Mouse theory = if you've seen one, be assured there's plenty more not far away.

These sorts of things do tend to have a domino effect. As confidence in the sector deteriorates, real estate prices will decline as demand falters. This will have a flow on effect to other troubled Chinese property developers. One by one they will collapse until only the strong survive. The problem is, we can never know how far the rot has penetrated and how many companies will collapse before it bottoms out. By then, global markets may be in a tailspin.