crimsonghost747
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Just a thread for talk about a BIG potential disaster that, for some reason, hasn't really been talked about here.
Long story short, Evergrande, one of the largest real estate companies on the planet, is about to go bust. I think this is more of a certainty than speculation now. There are demonstrations in their HQ, they have apparently hired bankruptcy lawyers etc. Rest of the chinese housing sector is tanking with them etc.
Stock (3333.hk) down from $15 to $3 year to date. Bonds are worthless. From what I can gather, the consensus seems to be that the Chinese government will take over at some point so some of the necessary functions of the company can continue but it does look like the $300b of bonds is going to go down the drain.
This is bound to create some ripples... both in the housing sector and banking.
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I heard nothing about this until yesterday. Only a few days earlier I heard China was in distress in other areas beyond just equity market levels.
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09-15-2021, 11:23 AM
(This post was last modified: 09-15-2021, 11:49 AM by fenders53.)
They are having a mini GFC. Hopefully it isn't widespread. China seems to have a lot of issues right now. Tough to manage hyper growth winding down to something more normal.
On a side note you following the China-Macau gambling regulation drama? WYNN and others getting slaughtered. I truly do understand they are trying to curb some things market wide they view as a threat, but they are attacking everything at once. They are going to screw this up and cut themselves off from international investing if they don't slow down.
WYNN is particularly dicey. 20yr agreement expires in 2022. They invested billions in infrastructure with literally billions more in design phase. They could literally lose their gambling license in under a year. China is hinting they are going to shake them down like BABA. That's bad long-term strategy IMO.
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I think BABA will be OK but I don't know when. It's going to be interesting to see if this expands.
crimsonghost747
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The CCP is not to be underestimated. Sometimes the things they do are hard for us westerners to understand but it helps a bit when you realize the differences in perspective. The west is obsessed with short term things. Our whole financial world runs on a quarterly cycle. Most people plan their lives a couple of years in advance. In politics, you have new elections every few years and thus policies keep swinging from left to right every few years. Change is constant, and often the aim of a change that has been made is to provide the benefit that is aimed for in a couple of years or less. It's all short term, especially politics. You make the moves you need to make so you get re-elected in the next election. Any sort of a political decision that, for example, costs money now and provides a benefit in 10 years is pretty much a negative thing since you will be seen as the one who spent money on "things that didn't work" and when the benefit is realized, it might very well be your opponent who is in the government then and they reap the popularity benefit of the decision made by you a decade ago.
China is different. They are playing the long-game. And I think it's a big part of how they went from being a poor agriculture focused country in the 1950's to being one of world's leading powers in 2020. They do not focus on short-term benefits but they choose to enact plans and policies that are good ones long-term... and it has worked brilliantly so far.
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09-18-2021, 08:37 AM
(This post was last modified: 09-18-2021, 08:45 AM by fenders53.)
I think their observation of our big tech's power alarms them. We let it go unchecked and getting a leash on them now is no small task without disruption of financial markets. They control the money and media and have great political influence. This would never work in an autocratic government and Xi knows it. We see it as straying from capitalism. They misplayed this badly. They simply needed to announce taxes would be raised on corporations and it would be progressively scaled. Now they have funding for socialist programs. Really no different than the goal of the left branch of our US administration. Instead they kicked in the door while they pick who gets shaken down. They forgot to be polite about it. The common worker may applaud this. I'm not blind enough to think we don't have a wealth distribution problem in the US.
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Sounds like they magically found the cash to pay their bond interest due Thursday. CCP now owns 25% of the company and Xi is chairman of the board.
OK I made that last part up but it wouldn't amaze me if they got some help because I doubt any institution is interested in financing them currently
Seriously though, China can probably print their way out of this mostly. It's likely to cause them to interfere in markets more though. Just like we did during the GFC.