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July 2, 2018 | China’s Heavily Levered Property Markets Headed South

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Different side of the world, but very familiar themes here:  real estate developers borrowed heavily in greenbacks and now face leaping service costs and defaults as the Yuan weakens against the US dollar.  Chinese households have doubled their mortgage debt in just the last 4 years (to $3.5 trillion outstanding at Q1 end).  Who would’ve thunk this would end badly, right?  See It’s all going wrong for China developers as bonds sink:

The Chinese property industry’s bad year keeps getting worse, sending bonds of some developers to record lows and triggering fresh concerns about a major pillar of the world’s second-largest economy.

Tighter financing constraints, a state campaign to rein in real estate prices and a tumbling yuan are battering the sector just as it faces an unprecedented wall of maturing offshore debt…

Developers’ dollar-denominated bonds are also getting more expensive because of a falling yuan. Evergrande and Country Garden are the most exposed by value, with at least 44 percent of their debt issued in the dollar, according to data compiled by Bloomberg. More than 90 percent of Kaisa Group Holdings’ bonds are denominated in the greenback.

Here is a direct video link.

 

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July 2nd, 2018

Posted In: Juggling Dynamite

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