VanEck è un gestore degli investimenti globale con uffici in tutto il mondo. Per aiutarti a trovare contenuti adatti alle tue esigenze di investimento, seleziona il tuo paese e il tipo di investitore.
Trends with Benefits è un podcast di VanEck con una prospettiva orientata al futuro. Ogni settimana, il conduttore Ed Lopez intervista un ospite per individuare nuovi approcci ai mercati, agli investimenti, al lavoro e alla vita in generale.
Restate aggiornati seguendo le ultime notizie su VanEck, i suoi comunicati stampa e informazioni importanti riguardanti la Società.
Elenco delle attuali notifiche (per. es. avvisi agli azionisti e risultati delle assemblee generali).
Elenco dei documenti relativi agli ETN di VanEck (per es. KID, Prospetti informativi, Condizioni definitive, ecc.).
Elenco delle note legali e delle procedure generali di VanEck (per es. politica retributiva, procedura di ricorso, ecc.).
Tramite strategie attive e soluzioni ETF costruite in maniera intelligente e innovativa, offriamo esposizioni che generano valore aggiunto in settori, asset class e mercati emergenti, nonché approcci differenziati a strategie tradizionali.
I team d'investimento di VanEck offrono strategie attive e passive, con esposizioni interessanti supportate da processi d'investimento ben strutturati. Le competenze della Società variano da opportunità d'investimento core a esposizioni più specializzate per accrescere la diversificazione del portafoglio.
Ricercate gli ultimi profili occupazionali e le opportunità di carriera in VanEck. Presentate oggi stesso la vostra candidatura per unirvi al nostro team europeo in continua espansione.
Elenco dei recapiti di VanEck in tutti i paesi europei. Per domande sulla nostra gamma di ETF e fondi comuni d'investimento, rivolgersi a VanEck.
China real estate developer Evergrande, facing default, is now expected to restructure its debt. Evergrande has hired debt restructuring advisers, its offshore bonds trade around 30 cents, and market convention (as of this week) is to trade the bonds “flat” (i.e., without accrued interest, meaning the market no longer thinks that staying current is a safe assumption). The situation appears likely to get worse, moreover, as the true scope of the company’s liabilities are discovered (cash or liabilities passed through wealth-management products organized by Evergrande is the latest one), in what has become a standard phase of Chinese (and to be fair, many other nations’) workouts. However, as we’ve been noting, Evergrande is no longer the only issue at this stage. The issue now is the Chinese property sector.
Our immediate concern remains contagion to other property sector bonds. The proximate problem was all the other Chinese property bonds that were not reflecting Evergrande risks. Almost all other offshore property bonds were trading at par/100 cents at the end of August. Our concern was very narrow and game-theoretic – why own a bond at par when Evergrande is telling you 70 cent losses, or more, are possible? We highlighted low-rated Kaisa bonds and high-rated Country Garden bonds as ones to watch (and we’d add that low-rated Fantasia will be another bellwether).
Those other bonds have finally begun to get hit in the past few days, but we think this is just starting. The chart below shows Evergrande bonds against those of some key issuers in the property sector as of 16 September.
Evergrande vs Peers - Bond Price Chart
Source: Bloomberg, VanEck. Data as of 16/9/2021.
Prior to its default, Evergrande was quite serious in trying to adhere to government policy, in particular the “three red lines” limiting leverage. In fact, Evergrande just recently crossed one of those lines into positive territory. Evergrande was also very focused on raising liquidity to avoid default. In particular, Evergrande lowered property prices (perhaps by around 15%) in order to generate sales.1 It also tried to sell a large commercial property in Hong Kong. But it was eventually prevented from doing so by, it appears, the Chinese government.2 In any case, we are only making another simple game-theoretic point almost identical to the point we made about bond prices earlier in the crisis. Property companies are likely to respond to these lower real estate prices by lowering prices. The same logic would seem to apply to homeowners. Additionally, anyone who was thinking of selling a large commercial property is now aware that there may come a point when they’re prevented from doing so, obviously pressuring current pricing.
China led global growth out of the pandemic, and was already sending weaker signals before Evergrande hit. The below chart shows that China’s PMIs were weak and risked leading the world to a slowdown. Anyway, risks from the property sector are adverse for Chinese growth and, given China’s growth-leadership, will have implications for global growth. This is happening at a time when markets are closely scrutinizing Chinese and global growth data for any signs of a turn.
Composite PMIs in China, US, and Eurozone
From the new change in policy tone, our conclusion is that China isn’t optimizing for markets or growth. We don’t need to inform you that the thrust of China’s economic policy seems to have changed, perhaps dramatically. From tutoring to gambling rules, Chinese policy is asserting itself as the key driver of market outcomes—and the thrust of the policy message is that market outcomes are not what are being optimized. Among China’s goals are greater sharing of prosperity and…more affordable housing. We’re not sure that the developments market participants care about, such as asset prices, figure significantly in this worldview.
We see no evidence that the local government, which is essentially representing central government policy, is focused on any “rescue”. In fact, the government appears to have prevented the sale of a key asset contemplated by Evergrande, when the company was focused on raising liquidity and avoiding default. As noted above, when Evergrande was busy consolidating businesses, trying to sell assets, avoiding default, and making progress on regulators’ “three red lines”, it tried to sell a major commercial building in Hong Kong.3 The government, however, ended up preventing the sale. In other words, the government’s priority is something else. What might that be? We’d suggest the fact that Evergrande needs to complete around 800,000 to 1,000,000 housing units, and their construction and payables are the government’s priority. Put simply, offshore and other bondholders are not the key focus right now, and given the newness of major Chinese bankruptcies, where bondholders stand in the queue is completely unclear, in our view.
China’s corporates have a lot of debt. China’s government does not. As a result, figuring out which corporate entities will be backed by the government (and when) has always been a question looming in the background. With Evergrande, it is now in the foreground. And what we hear a lot is that the government will eventually step in to “save” Evergrande and/or prevent further contagion.
We disagree, as argued above. In fact, Chinese policy has already involved government taking over key decisions and allowing the restructuring to proceed. And, because government backing is now in the foreground of bond pricing, we think all bonds in the property sector need to reflect a risk that government doesn’t step in. Our only game-theoretic point is that 100 cents (or even 90 cents) pricing for Chinese corporate bonds does not reflect the coin flip that many of them are becoming.
Now, the Chinese government also basically owns its banks. As a result, a typical contagion event into the financial system can be mitigated. It is likely that the authorities will ensure that whatever combination of bank forbearance is used (from write-downs to term-outs), bank financing will not be an obvious weak spot. Especially because the Chinese authorities seem to have been able to protect the banking system’s massive deposits from escaping, and certainly from escaping into dollars. At least so far. As a result, we would not at all be surprised by support for the banking system. But don’t confuse such support with support for the property sector, which is still in play.
Chinese currency weakness is a bigger risk than realized, though it will materialize over months and quarters, in our view. Here’s the case: Isn’t it reasonable to assume that China’s capital account is not going to be conducting the normal amount of USD into China’s financial assets? Further, isn’t it reasonable to see a global economic slowdown limiting the normal amount of USD into the Chinese economy for its exported goods? The only real solution to this setup is, in our opinion, a weaker currency. The great thing about this scenario is that nobody seems to expect it. And CNY is up 10% in the past two years.
CNY and China's Balance of Payments
Source: HSBC; Bloomberg LP. As of September 2021.
1 Source: Bloomberg, https://www.bloomberg.com/news/articles/2021-09-03/evergrande-property-sales-drop-26-as-china-s-home-market-cools.
2 Source: VanEck Research.
3 Source: VanEck Research.
For informational and advertising purposes only.
This information originates from VanEck (Europe) GmbH which has been appointed as distributor of VanEck products in Europe by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck (Europe) GmbH with registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial services provider regulated by the Federal Financial Supervisory Authority in Germany (BaFin). The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. VanEck (Europe) GmbH and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index.
All performance information is historical and is no guarantee of future results. Investing is subject to risk, including the possible loss of principal. You must read the Prospectus and KIID before investing.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
© VanEck (Europe) GmbH