Evergrande: TOO BIG TO BAIL
Evergrande and Chinese stocks seen tumbling in today's Hong Kong session:
Dragged by the #property development sector, Hang Seng Index extends losses to 2%, a new low in a year.— CN Wire (@Sino_Market) September 16, 2021
China #Evergrande once dropped 10% in Hong Kong, last down 8.54% at 2.57.#HongKong pic.twitter.com/T46BteLwZG
Stocks accelerated dropping off a cliff in China after this news hit the wires:
Game over— zerohedge (@zerohedge) September 16, 2021
EVERGRANDE SAYS ALL ONSHORE BONDS SUSPEND TRADING SEPT. 16
In order to ensure fair information disclosure and protect the interests of investors, after the company’s application, all existing corporate bonds of Evergrande Real Estate will be suspended for one trading day from the opening of the market on September 16, 2021, and will be opened on September 17, 2021.
..and the Chinese Real Estate crashes further:
China Stocks Falls Ahead Of Mid Autumn Festival— D.A. Market Securities (@itradeph) September 16, 2021
Sept 19 - 21
Macau Casino shares extends drop
HK Property stocks fall amid concerns that Evergrande’s financial woes may infect other developers pic.twitter.com/Csea9HeQd0
The major Chinese real estate developer Evergande built up a real estate empire making it the second biggest in China, controversially using the leveraged properties and US denominated junk bonds.
Evergrande has correctly been an issue for years— Chris Bailey (@Financial_Orbit) September 16, 2021
Fortunately - even taking into account ongoing Chinese policy evolutions - plenty of positive opportunities changes in China/HK.Spot the stock selection opportunities for the rest of the 2020s https://t.co/sSDn4KGZJm pic.twitter.com/6ZsTkBKryO
Assets and equity boomed over the past two years, but the net income somehow struggled lagging behind. The quantitative easing (QE) has supported economic growth, but also the over-leveraging properties and other bubbles on the market generating very little revenue to support the growth and diminish deflationary pressures. It worked till it didn't, right up until the pandemic broke out hurting the driving revenue foe Evergrande: commercial and tourism properties. At that time, Evergrande reportedly managed to rack up more than $300B USD in debt.
To put that in perspective $300B USD is the entire GDP of countries like Ukraine, Czech Republic, or Portugal. And that is just the *DEBT* that Evergrande has.
A gloomy day for the Chinese stock market:#SSE Composite Index -1.08%#Shenzhen Component Index -1.59%— CN Wire (@Sino_Market) September 16, 2021
The #CSI 300 Index -1.1%
SZSE #ChiNext Price Index -1.83%#China #StockMarket pic.twitter.com/7cHA66FCcU
"Currently rumors are swirling that Evergrande may not even have enough remaining capital to service the interest payments on their loans nevermind paying down their principals.
Now, the real estate developer claims they are going to liquidate property to get 'operations back on track' But, those of us in the crypto market understands how liquidations work.
If you are a liquidating because your collateral asset (real estate property) has sunk in value, and you have to sell that asset to pay back, then every time you sell it, the asset drops further," - Adam Cochran tweets
6/31— Adam Cochran (@adamscochran) September 14, 2021
Currently rumors are swirling that Evergrande may not even have enough remaining capital to service the interest payments on their loans nevermind paying down their principals.
Like bitcoin would sold the issue, that’s like saying flex seal is the solution to leaky pipes. The problem is internal, not external. China don’t care, they have better things to move on. Just another company getting chewed up in the blow off fase for china.— Rilly (@Fundafucktals) September 16, 2021
Adding to the pain, contagion concerns from Evergrande is making it more difficult for Chinese developers to refinance, despite a “critical” need to do so, according to Citigroup. Bond issuance is trickier onshore due to lower demand, and offshore due to increasing costs, they wrote in a Wednesday note. As ZeroHedge showed earlier this week, yields on China’s high-yield dollar have exploded rose to 13.7%, the highest since last year’s March market meltdown.
Evergrande is so big they will be in a race to the bottom as they'll be selling real estates which will dump the average price of properties, thus lowering their asset value and entering into a never-ending spiral. Evergrande reportedly owns a whopping 2% of all Chinese real estate market and so this has lead Chinese issued bonds from nearly all real estate developers to sink. However, Evergrande itself has been diving off a cliff all year and has reached a critical point. Now creditors are unwilling to accept their bonds and demanding payments made and aggressive restructuring options are being reviewed, Adam Cochran tweets.
I think China is trying to tell US Markets something. But don't worry, because there is always Brrrrrrr... pic.twitter.com/vE53zvrSAs— FinTwit (@wallsteetbets) September 16, 2021
On September 15, 2008, Lehman Brothers collapsed dissolving $600B in US assets leading us to the worst market crash since the great depression. $600B in assets.
Today is the anniversary of the Lehman Brothers collapse in 2008. Protests in the Evergrande building are literally happening right now. Will history repeat? https://t.co/NrasLxot0i— Gabor Gurbacs (@gaborgurbacs) September 15, 2021
Right now, Evergrande holds $200 billion in assets, and further $300B in additional unserviced debt: so it makes $500 billion in total. So its entirely on the same level as the assets that Lehman Brothers had. But, Lehman Brothers was a US bank broadly diversified across many industries. Evergrande is not. Evergrande is in one industry and only one industry. And its debt is held by banks across China, the US, Canada, UK, Australia and Europe.
Evergrande should fold on Lehman day (tomorrow)— zerohedge (@zerohedge) September 14, 2021
This also comes at a time when markets have been on an artificial, inflation driven, quantitative easing fueled run up like no other. So when the hammer does drop, it will drop hard. But, this will not only cause defaults on bonds, but it will mean billions of dollars unpaid to Chinese contractors and goods suppliers, and it will mean the largest ever bulk real estate liquidation ever if Evergrande goes under. That real estate collapse would mean the asset sheets of other real estate developers, banks and mortgage companies in China would all crumble. Remember the big empty houses in the US in 2008? That times 100x. - Adam Cochran tweets.
Here comes a quick refreshing reminder that China is holding over 15% of all global debt.
Xi Jinping is allowing Evergrande to go broke because he doesn't want property ownership creating "rich people"— Economics, politics and business analysis (@LondonAnalyst) September 16, 2021
that's what is behind this ....
The large correction in junk bonds market is not a matter of if, it is a matter of when, and how severe. The shockwaves would be felt in markets around the world, mostly in banks and funds, but Adam Cochran suggests it may touch crypto assets as well. He accomplishes his bearish outlook: "While we can hope that crypto one day becomes a flight from the tradfi markets, right now its sufficiently intertwined to its movements. Plus, there is the stark reality that this will have a huge impact on the commercial paper markets. Regardless of what commercial paper you hold, bonds and commercial paper would take a hit and some issuers may even fold. Currently both Tether and Circle hold commercial paper, and while I think it unlikely that either would have large swaths of Evergrande bonds, the whole market will reel a bit."
BTC holds $48K as Evergrande forms ‘Lehman Brothers moment’ for China pic.twitter.com/hLBw1gDgiv— BitValley (@BitValley) September 16, 2021
A definite bearish trend is evident, the meltdown in junk bonds will be really bad, the main media is slowly picking up the obvious Evergrande story.
Lehman was liquidated for $600 Bn. It was the poster child of the GFC.— Gustavo A Cano (@AGustavocano) September 16, 2021
Evergrande, the 2nd largest real estate developer in China, just defaulted on (apparently) the same amount of debt.
Coincidentally, the video below shows 15 buildings in China being…https://t.co/Uk6B5B9v7w
TOO BIG TO BAIL
Good morning to everyone, but especially those who realize the irony in the name Evergrande. pic.twitter.com/JR45WbyJQg— unusual_whales (@unusual_whales) September 16, 2021