BlackRock and HSBC funds boosted Evergrande holdings as crisis loomed Thomas Hale, Tabby Kinder and Stephen Morris Sep 22, 2021 https://www.afr.com/world/asia/blac...nde-holdings-as-crisis-loomed-20210922-p58tro Hong Kong/London| Funds managed by BlackRock and HSBC added to their holdings of Evergrande bonds just months before a liquidity crisis at the Chinese property developer pushed it to the brink of default. BlackRock in August bought up five different Evergrande dollar bonds through one of its high-yield funds, which had holdings in the developer then worth $US18 million ($25 million), Morningstar data show. The size of the holding had already expanded sharply this year as the fund’s assets under management rose. BlackRock had total exposure of close to $US400m across its funds, according to data compiled by Bloomberg. AP The world’s biggest asset manager had total exposure of close to $US400m across its funds, according to data compiled by Bloomberg based on June, July and September filing dates. A HSBC-run high-yield fund in July was also a net buyer of Evergrande’s debt and has increased bond holdings by 38 per cent since February as the fund expanded in size, the Morningstar data showed, though the value of its total exposure at $US31m declined over that period due to falling prices. The data highlight a willingness on the part of some of the biggest investors in Evergrande’s offshore bonds to continue to add to their holdings even after prices had started falling in the earlier stages of a liquidity crisis that is now rippling across international markets. $US300 billion in obligations to creditors and businesses, meaning the exposure these asset managers have more broadly remains limited. BlackRock declined to comment on its investment in Evergrande’s debt. HSBC’s asset management unit said, “as with many sectors we invest in, we closely monitor developments in the real estate sector”. The bonds of the world’s most indebted property developer have for weeks traded at highly distressed levels as it seeks to stave off a default on interest payments it owes on Thursday on its offshore bonds. A dollar-denominated bond maturing next year is trading at below 30 cents on the dollar, compared to close to its face value in late May. S&P Global Ratings expects the company to default this week and estimates it has close to $US20 billion in dollar-denominated bonds outstanding from two offshore subsidiaries. Ashmore, the emerging market investment specialist, had the highest exposure with more than $US400m of its bonds as of the end of June, Bloomberg-compiled data showed, while UBS had close to $US300m of exposure to Evergrande bonds as of the end of April, May, June and July. UBS and Ashmore declined to comment. In a note to clients last week, UBS said: “We continue to hold Evergrande in fixed maturity funds because exiting the position at this point removes any optionality around a successful resumption in construction activity, external financial assistance, or policy adjustment in the coming months, and Evergrande bonds are now trading at or below typical historical recovery values”. Evergrande is the best-known international borrower across China’s real estate developers, a highly-leveraged sector that has relied heavily on Asian dollar bond markets over the past decade but is now under pressure from Beijing to reduce its debts. Earlier this summer investors ramped up their bets against Evergrande bonds as prices began to tumble on waves of bad news, including frozen deposits and the halting of projects by local authorities, followed by angry retail investors descending on its Shenzhen headquarters last week. The company has long attracted market scrutiny for its debt load, which is the largest of any property developer in the world. “I have forbidden anyone [that works for me] from touching Evergrande equity or debt for 20 years,” said the chief executive of a private equity fund in Hong Kong. “It has always been obvious that it is super high risk and one day it would all end suddenly in tears”. Financial Times
Uncle Sam has made money from the Fannie and Freddie conservatorship. food and shelter are two fundamental needs for a person. they're kinda indispensable expenses for everyone. "Eventually the handout turned into a handsome profit for the U.S. government. So far, Fannie Mae has paid $167.3 billion and Freddie Mac has paid $112.4 billion. Add it up, and the two drew $191.4 billion but paid $279.7 billion, a net profit of $88.3 billion — and they continue to pay". https://www.cnbc.com/2018/09/05/fan...ncle-sams-cash-cows-a-decade-after-crash.html
China’s property market ‘built on stilts’, warns Jim Chanos Harriet Agnew Updated Sep 23 https://www.afr.com/world/asia/chin...lt-on-stilts-warns-jim-chanos-20210923-p58u1z New York| Evergrande’s crisis could be “far worse” for investors in China than a “Lehman-type situation” because it points to the end of the property-driven growth model in the world’s second-largest economy, said short-seller Jim Chanos. “There’s lots of Evergrandes out there in China – Evergrande just happens to be one of the biggest,” Mr Chanos told theFinancial Timesin an interview “But all the developers look like this. The whole Chinese property market is on stilts,” said the founder of New York-based hedge fund Kynikos Associates who is best known for predicting the collapse of energy group Enron. Jim Chanos: “There’s lots of Evergrandes out there in China – Evergrande just happens to be one of the biggest.” Bloomberg Concerns over the world’s most indebted developer have sparked drops in global markets this week as investors worry about the potential fallout if Evergrande does not meet a debt payment on one of its international bonds due on Thursday. Such a default, some say, could cascade across the broader Asian corporate debt market. The real estate company said a domestic payment due on Thursday had “already been resolved” but provided no indication of whether it would pay offshore investors, which include several major international asset managers. Investors broadly agree that Evergrande’s unravelling will not hurt global banks and investors in the way Lehman Brothers’ failure did in the financial crisis because its international debt load, at about $US20 billion ($27.6 billion), is relatively small.
9/23/21 Chinese authorities have told local officials to prepare for a potential collapse of heavily indebted Evergrande, The Wall Street Journal reported Thursday. Local officials described the signals from Chinese authorities as “getting ready for the possible storm” and said the government told them they should step in only at the last minute to prevent spillover effects from Evergrande’s demise, according to the Journal. The large developer made a payment on a local bond Wednesday. However, it’s unclear if the company will pay interest due Thursday on its offshore bonds.
There seems to be huge problems at China Evergrande New Energy Vehicle Group (Evergrande NEV) too. Salaries are not paid, suppliers are not paid... So not only the building department has problems.
Evergrande chairman pocketed $8 billion in dividends while forcing employees to lend company cash Many workers borrowed money from family, friends to hand it over to their employer https://www.taiwannews.com.tw/en/news/4295885 By Liam Gibson, Taiwan News, Staff Writer 2021/09/24 TAIPEI (Taiwan News) — New investigations by Forbes reveal Hsu Chia-yin (許家印), chairman of Evergrande Group (恆大集團), continued to stuff his pockets with dividends while his company racked up enormous debt worth US$300 billion (NT$8.32 trillion). The company’s chairman has received US$8 billion from cash dividends since Evergrande’s 2009 IPO on the Hong Kong Stock Exchange, according to a Forbes report. Meanwhile, the property developer’s total liabilities increased every year since it went public, according to its annual reports, but it paid out a dividend to Hsu every year except 2016. Evergrande pushed China’s housing market to the brink of disaster when it warned banks that it would be unable to make its debt payments due this month. The company still owes an estimated 1.6 million incomplete apartments to buyers who have already made down payments. The news comes just days after the New York Times uncovered that Evergrande had threatened to withhold bonuses from its employees if they did not lend cash to their company. Unable to come up with the cash demanded by their employer, some workers asked their friends and family for money, while others borrowed from banks, per the New York Times. Those employees were seen protesting alongside worried home buyers protesting outside the company’s headquarters in Shenzhen on Monday (Sept. 13). “There isn’t much time left for us,” said one 28-year-old employee living in Hefei, who said he put $62,000 of his own money into the company’s investment arm, at the request of senior management. As for Hsu, Forbes estimated his fortune to be worth US$27.7 billion as of March 5 on this year’s World’s Billionaires list, making him the 53rd-richest person in the world.
September 24, 2021 https://www.reuters.com/world/china/xi-china-evergrande-delicate-balancing-act-2021-09-24/ China Analysis: For Xi and China Evergrande, a delicate balancing act By Andrew Galbraith A man rides a vehicle past the construction site of Evergrande Cultural Tourism City, a project developed by China Evergrande Group, in Suzhou's Taicang, Jiangsu province, China September 23, 2021. REUTERS/Aly Song/File Photo SHANGHAI, Sept 24 (Reuters) - The crisis at property giant China Evergrande Group poses a $305 billion conundrum for President Xi Jinping: how to impose financial discipline without fuelling social unrest. With one year before the Chinese president is poised to secure an unprecedented third five-year term, the stakes are high during what is proving to be the most consequential period of his tenure. Evergrande's borrow-to-build model was enabled by a government reliant on property sales for revenue and unwilling to bite the bullet on runaway indebtedness for fear a collapse in prices would have devastating consequences for a country in which property accounts for 40% of household wealth, analysts, academics and economists say. Xi, who has unleashed a spate of industry and societal reforms this year in the name of "common prosperity", has made clear that the excesses of decades of breakneck growth powered by a relentless rise in property prices and debt must be brought to heel. But shared responsibility for Evergrande's crisis - and worries about the repercussions of a messy collapse - complicate decisions on the fate of a conglomerate with $305 billion in debt that is scrambling to pay creditors, including bondholders owed $83 million in a coupon payment that was due on Thursday. "The government has to some degree caused the problems at Evergrande," said Andrew Collier, managing director at Orient Capital Research, citing debt ratio caps, known as the "three red lines", placed on developers in 2020 that put Evergrande under significant stress and forced it to start to sell assets. Those caps followed renewed official concern last year over property sector froth after monetary easing to cushion the impact of COVID-19 drove surging sales and signs of speculative overbuilding by developers. But clamping down on property prices is difficult given the fiscal dependence on the sector. Local governments, which Orient Capital estimates account for 89% of total government spending, derived more than 40% of revenues from land sales in 2020, driving a codependent relationship with developers. "(Developers) seem to get caught up in the political economy ... which effectively leads to a tremendous number of bad decisions because you're now making investments based on political whim and political winds, rather than actual sound business sense," said Fraser Howie, author of several books about China's financial system. China's State Council Information Office did not immediately reply to a faxed request for comment. DEEP ROOTS The roots of the crisis date to tax reforms in 1994, which bolstered central government coffers but left local governments reliant on land financing for revenue, said Alfred Wu, associate professor at Lee Kuan Yew School of Public Policy in Singapore. That triggered a rise in property prices and the growth of developers like Evergrande, which thrived in third- and fourth-tier cities. "Evergrande is a cash cow for regional governments. If the company goes bust, the model of land-financing and regional governments will go bust, too. The central government won't allow that," Wu said. Despite years of warnings from some quarters about the business model used by Evergrande and others, which has included taking on heavy debt to spur land and project acquisitions, the company was hardly a rogue operator. Chairman and majority shareholder Hui Ka Yan took pains to show off his close alliance with Beijing and the ruling Communist Party, and was reciprocated. Included in a list of Hui's achievements in Evergrande's 2020 annual report are being named a "national model worker", an award-winning poverty fighter and an "Excellent Builder for the Socialist Cause with Chinese Characteristics". GREAT AWAKENING Stability-obsessed Beijing is well aware that the rise in the housing market created not only great wealth but deep inequality. One portfolio manager based outside China who declined to be identified said the 2019 anti-government protests in Hong Kong, blamed partly on inequality fuelled by sky-high housing costs, were a wake-up call for Beijing. This year, Xi has set out to reform the "three huge mountains" of housing, education and healthcare to rein in soaring costs for city dwellers as a way to shore up legitimacy as the "people's leader", analysts said. Protests by disgruntled suppliers, home buyers and investors last week illustrated discontent that could spiral in the event a default sparks crises at other developers. UBS estimated there are 10 developers with potentially risky positions accounting for combined contract sales of 1.86 trillion yuan ($287.92 billion), nearly three times Evergrande's total. Still, many analysts say a wider crisis is unlikely, predicting that authorities would choose a route of squeezing the overall property sector while addressing individual problems as they arise. "The government knows that if it doesn't handle Evergrande carefully and lets it go bankrupt, disgruntled homeowners and shareholders could cause social instability, loan defaults could lead to financial risk, massive layoffs could add to employment woes, and private firms could be further spooked," said Tang Renwu, who heads the School of Public Administration at Beijing Normal University. Reporting by Andrew Galbraith in Shanghai Additional reporting by Yew Lun Tian in Beijing Editing by Tony Munroe, Robert Birsel.
Much of the issues mentioned in above article are mirrored in our Western countries, spiralling debt, rampant property prices, local government sucking on the housing/realestate tit for income, inequality, greed, speculation...... Will the West wake up to what is unfolding before their eyes in China? I have my doubts, greed and power and lack of accountability/responsibility everytime corrupts until it's too late and the little people (the unfortunate) wear the brunt of the pain.