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China's Evergrande Group crisis

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Seems that Evergrande shares hve been placed in a trading halt (again).

From Indian Business Insider

Share of embattled property developer China Evergrande Group were suspended from trading on Monday, a filing from the Hong Kong stock exchange showed.



Trading was also halted in shares of its property services unit, Evergrande Property Services Group Ltd, and electric vehicle unit, China Evergrande New Energy Vehicle Group Ltd, exchange filings showed.


The filings gave no further details.


Evergrande, the world's most indebted developer with over $300 billion in liabilities, has been struggling to repay its suppliers and creditors and complete projects and homes.

Its flagship unit Hengda Real Estate Group Co Ltd secured approval from its onshore bondholders over the weekend to delay a coupon payment due last September to September 2022, according to the company lawyer's filing to the Shenzhen Stock Exchange on Sunday.


Hengda held a meeting with creditors of the 4 billion yuan ($629 million) 2025 bond on March 18-19 to approve the payment of interests incurred between September 2020 to September 2021 to be made in September 2023.

Evergrande has so far avoided technical bond defaults onshore, though it has missed payments on some offshore bonds.


Evergrande shares traded at HK$1.65 before the suspension. They have gained 3.8% this year after plunging 89% in 2021.
Wonder what it is this time?
Mick
 

Dona Ferentes

NEMO SIBI NASCITVR
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Wonder what it is this time?
Snowballing?

China Real Estate Information Corporation reported that home buyers had stopped mortgage payments on at least 100 uncompleted projects in more than 50 cities on Wednesday. What was particularly worrying was that the numbers indicated a rapidly growing trend, up from 28 projects on Monday and then 58 projects on Tuesday.

There are three connected reasons mortgagees could be boycotting payments.

First, there are concerns that shaky property developers will go out of business before the projects are completed. Defaults and delayed debt repayments have basically continued for a year, since the problems surrounding Evergrande.

Nomura economists this week estimated that Chinese developers have only delivered about 60 per cent of homes they pre-sold between 2013 and 2020 – a period in which Chinese mortgage debt rose by $US4 trillion.

Second, there are concerns that banks, which have an estimated $US6.8 trillion of mortgages on their books and another $US1.9 trillion in loans to developers, may crack under the weight of this property debt. A series of bank runs in recent weeks on lenders that froze developers have raised concerns about the fragility in this sector.

Finally, there are obvious concerns that recent falls in house prices – down for a 10th-straight month in June – mean properties are worth less than what consumers paid for them.
 
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Snowballing?

China Real Estate Information Corporation reported that home buyers had stopped mortgage payments on at least 100 uncompleted projects in more than 50 cities on Wednesday. What was particularly worrying was that the numbers indicated a rapidly growing trend, up from 28 projects on Monday and then 58 projects on Tuesday.

There are three connected reasons mortgagees could be boycotting payments.

First, there are concerns that shaky property developers will go out of business before the projects are completed. Defaults and delayed debt repayments have basically continued for a year, since the problems surrounding Evergrande.

Nomura economists this week estimated that Chinese developers have only delivered about 60 per cent of homes they pre-sold between 2013 and 2020 – a period in which Chinese mortgage debt rose by $US4 trillion.

Second, there are concerns that banks, which have an estimated $US6.8 trillion of mortgages on their books and another $US1.9 trillion in loans to developers, may crack under the weight of this property debt. A series of bank runs in recent weeks on lenders that froze developers have raised concerns about the fragility in this sector.

Finally, there are obvious concerns that recent falls in house prices – down for a 10th-straight month in June – mean properties are worth less than what consumers paid for them.
Just to add to the problems, it seems that (some) of the peasants are revolting
From Zero Hedge
Chinese residents are increasingly walking the walk. First, it was the violent outcry against mandatory covid vaccines that put an end to Beijing's desire to forcibly innoculate all Beijing residents in just 48 hours - a feat not all of America's armed militias have been able to achieve, and now it's a grassroots push for what appears to be a debt jubillee as millions of homeowners suddenly stop paying their mortgages, a shocking move that has sent shockwaves across China's capital markets and has sparked panic within China's political leadership circles.

As Bloomberg reports overnight, a rapidly increasing number of "disgruntled Chinese homebuyers" are refusing to pay mortgages for unfinished construction projects, exacerbating the country’s real estate woes and stoking fears that the crisis will spread to the wider financial system as countless mortgages default.

According to researcher China Real Estate Information, homebuyers have stopped mortgage payments on at least 100 projects in more than 50 cities as of Wednesday, up from 58 projects on Tuesday and only 28 on Monday, according to Jefferies Financial Group Inc. analysts including Shujin Chen.
The boycotts raise the risk of mortgage defaults, a new set of troubles for banks that are already squeezed by exposure to ailing property developers. Mortgages make up almost 20% of total bank loans outstanding, amounting to about 39 trillion yuan ($5.8 trillion).

In a rather panicked note from Morgan Stanley economist Zhipeng Cai (available to pro subscribers), he addresses the topic of widespread mortgage nonpayment and writes that "we estimate 188mn sqm (1.7mn units) are at risk. We expect local governments will be urged to help completion, but a national bazooka solution remains difficult in near term."

His warning: "Non-linearity is the key to watch."

To others, however, such as Xie, this is an exaggeration. According to the Bloomberg reporter, "it’s reasonable to argue that this is unlikely the start of something as bad as the US subprime crisis. Unlike lending to developers, mortgages have been regarded as the safest assets on banks’ balance sheets, as Betty Wang, an economist at ANZ, pointed out. Mortgage defaults have been rare, and rising home prices over the years have increased the value of banks’ collateral."

Some data: the average non-performing mortgage-loan ratio of the six largest banks, which accounted for 68% of China’s total home loans, was only 0.38% in 2021, compared with an NPL ratio of 2.73% for developers, according to Wang’s calculations.
These things always seem to develop very quickly in China, and just as quickly get killed off.
Mick
 
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The "I aint gunna pay no more" paradigm seems to be spreading in China.
From Zero Hedge
In a jarring case study of what happens when a ponzi scheme goes into reverse, hundreds of contractors to the property industry complained that they can no longer afford to pay their own bills because developers including China Evergrande Group still owe them money, Caixin reported, citing a statement it received from a supplier Tuesday.

Similar to homebuyers who have taken a stand and refuse to pay for properties that remain uncompleted, one group of small businesses and suppliers circulated a letter online saying they will stop repaying debts after Evergrande’s cash crisis left them out of pocket.

“We decided to stop paying all loans and arrears, and advise our peers to decline any requests to be paid on credit or commercial bill,”
the group said in the letter dated July 15, which was sent to the developer’s Hubei office. “Evergrande should be held responsible for any consequence that follows because of the chain reaction of the supply-chain crisis.”

As Bloomberg oh so perceptively puts it, "the payments protest is the latest sign of how a movement by homebuyers to boycott mortgages on unfinished homes in China is spreading to affect other sectors in the economy."



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Good morning,
Been reported today (29/11/22):

Evergrande has sold land earlier earmarked for its headquarters in the southern tech hub Shenzhen for $1 billion, according to an official document, as it fights for survival. The real estate behemoth has been involved in restructuring negotiations after racking up $300 billion in liabilities following Beijing’s crackdown on excessive debt and rampant speculation in the property sector.

The 10,377-square-metre (111,700-square-foot) land in Nanshan district was sold to Shenzhen Anhe No. 1 Real Estate Development Co. for 7.5 billion yuan, according to land transaction records published by the city’s Public Resource Exchange Centre on Saturday.

Evergrande has scrambled to offload assets in recent months and its financial situation has worsened considerably since last year.

Its troubles are emblematic of the crisis rippling across China’s massive property sector, with smaller companies also defaulting on loans and others struggling to raise cash after Beijing imposed widespread lending curbs in 2020.

Major developers including Evergrande have failed to complete projects, sparking mortgage boycotts and protests from homebuyers. China’s banking regulator earlier this month unveiled sweeping measures to support the property sector, including credit support for distressed developers to ensure the completion and handover of projects to homeowners.

Have a very nice day, today.

Kind regards
rcw1
 
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