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China's real estate bubble about to burst - Evergrande
#11
[quote pid='28737' dateline='1632050636']
My reading on RIO brought me to this issue as well.  Some believe the housing weakness in China is more responsible for the iron ore price weakness than the climate change emissions reductions promise.
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That sounds very plausible.  Large financial meltdowns cause numerous large ripples.  Among many other industries steel and copper demand would be affected for some time.  Multiple mine slow downs in face of lower prices.  Those mining shovels are connected directly to the power grid so if they slow down the local utility's earnings just dipped several percent.  A single RIO mine might keep 100 CAT workers employed when it's booming.  When we get reckless with finances in a major economy it just trickles all over the place  and hurts people.  Then we have an election and try some new tricks.  

How was that for heading off on a tangent?  A single economic powerhouse has a problem and people all over the globe can be affected.  I don't miss recessons.  I sure am glad the US has cancelled them from now on.  Smile   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.

BTW, ALE, that one utility stock I trade is possibly hurt some by the China debacle as they supply the Minnesota iron ore miners.
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#12
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
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#13
It's a confusing situation, but from what I can gather from quickly reading the news is that they will make the payments on the local bonds now. This was apparently worth $35.9 million.

This is just from an article:
"Evergrande is set to make its onshore bond payment on time, but the developer has not indicated whether it will be able to pay $83.5 million in interest due on its March 2022 bond VG158043114= on Thursday. It has another $47.5 million payment due on Sept. 29 for March 2024 notes VG158786753=."

I see many other articles reference the $35.9 million figure, so would be logical that this latest "of course we will pay" is indeed the smaller, local, bond interest. And that is definitely the government stepping in to make sure the local bonds get paid, they do not want this to spread.

Thursday may be interesting when it's time to pay the bonds that are due to foreign investors. Big Grin

Edit: I should add that I'm not entirely sure if they are actually paying the interest on those local bonds, or whether they reached some sort of a deal to get around it. (such as an extension or some type of restructuring)
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#14
Yes it's very confusing. This is where the CCP needs to interfere and be less aggressive elsewhere if they have any desire to be investable from the outside world.
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#15
China is making some moves.
https://finance.yahoo.com/news/china-eas...31162.html

Long story short: the Chinese government is now telling banks to lend more money more easily to home buyers, as well as letting banks sell residential mortgage backed securities in large amounts again to limit their own exposure.

Looks to me like a lot of people have lost confidence in the real estate market, and now they need to find ways to push more capital into buying houses so the overleveraged developers can remain afloat. Might just be a strategy to buy some time since I don't see this as a long term solution.

Giving out mortgages to people who logically can't afford it, pushing the risk to secondary markets through RMBS, the whole real estate sector being overleveraged... 2008 vibes anyone? Big Grin
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#16
We'll see how long they can GDP their way through it.  They are acting as fiscally irresponsible as the US.  Trade negotiations are going to be interesting.  Not a good time for them to let the trade imbalance go.  They have a tough winter to navigate.
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#17
(10-14-2021, 11:58 PM)crimsonghost747 Wrote: China is making some moves.
https://finance.yahoo.com/news/china-eas...31162.html

Long story short: the Chinese government is now telling banks to lend more money more easily to home buyers, as well as letting banks sell residential mortgage backed securities in large amounts again to limit their own exposure.

Looks to me like a lot of people have lost confidence in the real estate market, and now they need to find ways to push more capital into buying houses so the overleveraged developers can remain afloat. Might just be a strategy to buy some time since I don't see this as a long term solution.

Giving out mortgages to people who logically can't afford it, pushing the risk to secondary markets through RMBS, the whole real estate sector being overleveraged... 2008 vibes anyone? Big Grin

Yikes.  Praying that China's mortgage problem doesn't affect the US too much.
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#18
Imagine if we had not passed out free money to buy their stuff. I don't remember their GDP growth going sub 5% for decades. Doesn't sound like a good time for them to have a recession.
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#19
Ohh and what also should be mentioned in this thread is that I'm not actually sure if they ever paid the interest on those foreign bonds. I doubt it.

Also, the Chinese government has been liquidating small parts of Evergrande in the past few weeks... basically Evergrande has agreed to sell some of these assets to for example banks that are owned by the government. Could be that this is a controlled destruction of Evergrande, and they are moving vital assets out of the burning building in order to limit collateral damage when Evergrande does fail.
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#20
They did not pay them. China is not at Lehman Brothers stage but it smells like Bear Stearns. Spreading the pain around so they can try to save the industry.
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