David Rosenberg, Rosenberg Analysis president, joins The Trade to debate the abatement of the worry that Evergrande’s default is China’s “Lehman second.” For entry to reside and unique video from CNBC subscribe to CNBC PRO:
Property developer China Evergrande’s debt woes will not be more likely to trigger the identical fallout because the collapse of U.S. funding financial institution Lehman Brothers in 2008, analysts mentioned.
Evergrande’s Hong Kong-listed shares have tumbled almost 90% since July 2020, because the Chinese language authorities cracked down on hypothesis in the actual property market.
The inventory has misplaced greater than 20% within the final 5 buying and selling days, and buyers are watching to see if the extremely indebted actual property big will have the ability to make tens of millions of {dollars} in curiosity funds on U.S. dollar-denominated bonds within the coming days. The jitters have contributed to world inventory market declines this week.
Evergrande holds bodily property
Nonetheless, with regards to the dimensions of potential impression on worldwide monetary markets, analysts level to a serious distinction between the Evergrande disaster and the Lehman collapse: Evergrande holds land, whereas Lehman held monetary property.
Evergrande has money circulate issues, however discuss of systemic dangers is “a bit overdone, frankly,” Rob Carnell, regional head of analysis for Asia-Pacific at ING, mentioned Wednesday on CNBC’s “Squawk Field Asia.”
“Let’s face it, this isn’t Lehman’s, this isn’t LTCM,” Carnell mentioned, referring to American hedge fund Lengthy-Time period Capital Administration, which failed within the Nineteen Nineties. and spurred a panic. “It’s not a hedge fund with large leveraged positions or a financial institution whose monetary asset costs are hurtling in the direction of zero. It’s a property improvement agency with numerous debt, you already know, 300 billion plus thereabouts in greenback phrases.”
He expects that if Evergrande can get some money circulate into its bodily property, the corporate can end its improvement tasks, promote them and begin paying down debt.
On Wednesday, the corporate’s actual property group introduced it might pay the curiosity on time on a mainland-traded bond denominated in yuan.
“Evergrande is going through a liquidity crunch though it owns a big land financial institution,” Larry Hu, chief China economist at Macquarie, mentioned in a report Tuesday. He famous that the developer’s property consist primarily of land and housing tasks which might be value simply over 1.4 trillion yuan ($220 billion).
The collapse of Lehman Brothers led to a crash in monetary derivatives — credit-default swaps and collateralized-debt obligations — “inflicting the market to doubt the well being of different banks,” Hu mentioned.
“Nevertheless it’s fairly unlikely that the Evergrande saga would trigger the land value to crash,” he mentioned. “In any case, the worth of land is just extra clear and steady than monetary devices. It’s particularly so in China, the place native authorities monopolizes the land provide.”
“Because the consequence, [the] native authorities has a robust incentive to stabilize land value. Within the worst-case situation, native authorities may even purchase again land, as they did in 2014-15,” he added.
Sturdy authorities management
One other essential distinction in Evergrande’s case is the better stage of presidency management and involvement in China’s actual property trade.
“Chinese language banks and lots of different entities are authorities arms first, intermediators a distant second,” analysts at analysis agency China Beige Ebook mentioned in a report Monday. “Even non-state financials will be managed to an extent not often seen exterior China. Industrial chapter is a state selection.”
“Beijing says lend, so that you lend; when and even whether or not you get your a refund is secondary,” the report mentioned. “No Lehman-style contagion story is smart right here and due to this fact no Lehman Second will there be.”
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Evergrande is just the tip of the iceberg in terms of major problems in China. The Communist Chinese Government has epically-overcontrolled in more ways than can be counted. Their ultra-intense, highly-intrusive surveillance of citizens is just one example. No one with an understanding of basic human rights and effective governments believes their approach is sustainable. If you think this latest problem with Evergrande is big, just wait. The world is going to witness major, globally-impacting events in China as they slowly purge the authoritarian leadership and transition into more humane, sustainable forms of government. Not pretty.
That's not David Rosenberg; not bearish enough.
That just be honest it’s manipulated
This video won't age well i guess.
This is definitely China's Lehman moment if the pros say it's not
Xi: houses are for living in, not to make same speculants richer.
Sopranos bust out
Evergrande just becomes a state owned enterprise just like HNA group.
Let me help you out there Rosenberg,
No one. I repeat NO ONE in China is going to put a down payment on a house to be built later for years, if ever again.
That means that all of these Ponzi scheme RE developers are going to fail.
If China doesn't honor the foreign debtors (and it won't) no money will flow into China for any business (not just RE) for a very long time.
That means, China comes to a standstill, the rest of the high priced world has to instantly take up the production slack , which instantly drives up the cost of everything 100%.
No one can pay those higher prices so the world economy shrinks (that's the best case scenario)
This doesn't all play out tomorrow, but it could happen over the next 1-2 years.
Cramer said there will be a 10% correction and sell and sell !!! His predictions are all incorrect
Investing in crypto(Bitcoin) is the best investment anyone can do this seasons, because crypto investment made a lot of people millionaires
Money is an issues that everyone has for a better and luxurious life. Life was hard for me until I started trading Bitcoin and now earning $4,035 per week
If they default without any intervention, then its absolutely a lehman brothers situation
You wish…
Can't you news reporters ask what American firms have money in Evergrande?
It's a relief rally because China may nationalize the real-estate market?
Our economy sounds super stable.
How much is over priced land and partially built buildings worth? Can someone explain who wants to buy those assets? Are you guys a news agency or state owned?
A year from now, when the fallout from Evergrande knocks out 50% of China's production and export, we'll see if they say it was a Lehman event.
Investing in crypto now should be in every wise individuals list, in some months time you'll be ecstatic with the decision you made today.
Sure it isn't.
They are they just don’t want investors to start pulling money out the smart one already ahead of the game they pushing the market up to make it look good
Market about to close & whoever was supposed to bail them out ain’t show up who in there right mind gonna take on that type of debt be real
did he say US economy is basically a large and closed economy? that doesn't sound right.
Crash crash crash crash !
They said Lehman wasn’t Lehman till it was Lehman. Don’t understate the debt bubble the world’s factory is in just because there’s limited Western direct investment
Financial sector can't produce value, every coin they earn is directly taken from someone else's pocket. Bitcoin made a lot of people millionaires and it made more people broke and deeply in debts. think twice before you invest, don't believe any so called entrepreneur's lies
CCP will have a better handle on localizing this than it did with covid. No global housing and financial crisis will result from this.
No need to worry guys the CCP bailed out domestic bond holders, which makes up at most 20% of evergrande’s debt
No, this is not a Lehman Bros moment. Our institutions are leveraging to the gills enough that they will repeat it themselves.
Communist hong kong SAR government has to share the wealth with the poor. if rich government refuse to share the wealth with people. Xi will fire them.
https://youtu.be/1oGuwYmjZBUl
This guy – China shill.
Hilarious. Chinese commies are so pathetic. You have to be out of your mind to invest in China…
If Evergrande collapse it’s 100% Lehman moment and it could be worse.
Everyone on a script dont believe a word
If Evergrande Default is not Lehman moment most media will not stop talking about it past few day. The entire China Financial system could collapse.
I predict this guy's days of 'expert' opinions is near its end. This is very much like a Lehman moment
La Chine est le pays des propriétaires (proche de 100%) depuis l'an 2000. La Bulle Immobilière Chinoise est éclatée car les banques locales cessent la production du crédit immobilier les unes après les autres. La Bulle Immobilière Française, la Plus Grosse au Monde depuis 2006, sera aussi éclatée dans les prochains mois car les banques vont cesser de supporter les risques excessifs de surévaluation de l'immobilier français (plus de 300%). A ce jour l'Encours du Crédit à l'Habitat s'élève au montant astronomique de 1185 milliards d'€uros selon la Banque de France. La Bulle Immobilière chinoise repose sur une économie réelle car il existe énormément de constructions neuves. En Revanche la Bulle Immobilière française repose exclusivement sur la spéculation des individus et l'alimentation excessive du crédit immobilier avec l'encouragement de l'Etat. Alors occupez-vous de vos oignons ! Les plus grandes faillites seront les banques françaises !
La dette publique de l'Etat est 10 fois plus importante que celle de Evergande ! L'Encours du Crédit à l'Habitat est 5 fois plus important que la dette de Evergande.
Ok so I might be dumb but ive heard the “debt is domestic so it’s not a problem” line quite a few times, but can someone explain to me why it’s not a problem? It seems like something thatd still be a problem, even if it’s different from foreign owned debt.
Get this message to evergrande in China .there is a possabilit that Henderson development in japan has been confused with Henderson development in Nevada America which is owned by blacks and Mexicans .I think they got their wires crossed in decision meetings.
Just FYI before you got pulled into the fear-mongering sinkhole, China has been reining in the real estate market for a while, everything was done with a long term goal to have a healthy real estate market. Everything was planned, unlike in the west, the government will ignore any bubble and just let it blow up. And 300 billion would’ve definitely crippled American financial market, but it’s very much absorbable in the Chinese market.
Chinas mines are filled with water floods have broken the dams all over houses are built on speculation China can´t deliver Volvo is coming back to Sweden that´s why!
Is China practicing capitalism in its entirety by letting evergrande fail unlike the US?
Gaslighters!