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Evergrande shares plunge as much as 87% as trading resumes after 17 months

cnbc.com

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Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#71

Post by alex_duf »

slushh wrote: post #68
bboygravity wrote: post #58

Earlier quoted context omitted.

TLDR: there's a huge regulatory crisis going on in both the US and China markets (again). Now the failure of 1 large entity can crash entire empire(s). Basically the same corruption that societies have been battling ever since societies existed.

What's the worst that can happen? It's all just numbers on papers or memory. When Evergrande folds, others will pick up the opportunity. Why should the government and the non-investors pay for government agencies that enforce regulations? If investors cannot handle due diligence, let them pay private agencies to secure their investments.

Any financial crisis was just numbers on papers or memory. Yet implications are very tangible

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#72

Post by re-thc »

dilippkumar wrote: post #61

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

> 2. China is going through a weird demographic situation. The younger generations are significantly fewer in number, they will need fewer apartments to live in.

That's not really the issue. I doubt the younger generation can afford it. The problem is where the wealth is going - as in those with the $$$.

> The demand side is mostly people buying second and third units as investments.

No, at least not always. At some point you weren't allowed to buy more than 1 or even use your funds openly this way.

So to wrap up - those with wealth lost or have lost trust with China / the government and are withdrawing at alarming rates, e.g. to overseas. Due to how COVID was handled and many other cases where your wealth could just disappear - people now rather keep their $$$ elsewhere - not back "home".

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#73

Post by xwolfi »

dilippkumar wrote: post #61

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

Google "Andrew Left citron research evergrande". He explained it all in 2012, was banned from Hong Kong trading for 5 years as a result, just when Evergrande finally grew its ponzi scheme too big.

Long story short: the head of Evergrande was politically connected, helped build China on borrowed money, had no credible plan to ever repay all these loans, one day China decided to stop leveraging and Evergrande had to unwind... except it couldn't because it didn't have enough actual money to repay loans quickly. Too bad their bonds were sold to everyone and their grandmothers in China to try to find yields in the no-interest environment. Now that interest rates are back, nobody want junk Evergrande bonds anyway. Catch-22.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#74

Post by re-thc »

dvh wrote: post #49

Can someone explain to me why is this problem? The houses that they've built are still standing, people can still live in them, what's the problem?

> what's the problem

The problem is you assume they're legit. Who says they actually completed the projects (houses)? Who says there are no defects and that people can live in them? How do you even come to that conclusion? Just assume in good faith?

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#75

Post by Marrand »

jbm wrote: post #44
NotYourLawyer wrote: post #30

Why isn’t it down 100%? According to the article, they’re in bankruptcy with way more liabilities than assets. Presumably the shareholders are getting wiped out.

Bed Bath and Beyond and Sears helped me realize that the cold eyes sanity of investors is often overstated. These were both bankrupt companies who developed stockholders with cultish beliefs around the company's ongoing viability. With Evergrande, I imagine some people believe it might be important enough for China that it may someday get a bailout. I don't believe it.

I agree with you, but it might not be completely irrational to buy an about to be bankrupt company. If the assets on book is sufficiently larger than the stock price, investors might get a payout when it gets sold off after fees. When Enron was liquidated, the last investors that bought the stock ended with an 8x RoI (according to an Acquired episode). Still an insane gamble obviously.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#76

Post by ben_w »

slushh wrote: post #68
bboygravity wrote: post #58

Earlier quoted context omitted.

TLDR: there's a huge regulatory crisis going on in both the US and China markets (again). Now the failure of 1 large entity can crash entire empire(s). Basically the same corruption that societies have been battling ever since societies existed.

What's the worst that can happen? It's all just numbers on papers or memory. When Evergrande folds, others will pick up the opportunity. Why should the government and the non-investors pay for government agencies that enforce regulations? If investors cannot handle due diligence, let them pay private agencies to secure their investments.

> What's the worst that can happen?

The Great Depression, the Great Recession.

> Why should the government and the non-investors pay for government agencies that enforce regulations?

Apart from them being ostensibly a communist nation, it's good for business. Everyone's business.

This is also why Greece got a lot of help from Germany and the IMF about 10-15 years back.

> If investors cannot handle due diligence, let them pay private agencies to secure their investments.

How? The investment is a promise to build a home.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#77

Post by jbm »

Dylan16807 wrote: post #63
jbm wrote: post #44

Earlier quoted context omitted.

Bed Bath and Beyond and Sears helped me realize that the cold eyes sanity of investors is often overstated. These were both bankrupt companies who developed stockholders with cultish beliefs around the company's ongoing viability. With Evergrande, I imagine some people believe it might be important enough for China that it may someday get a bailout. I don't believe it.

On the other hand, Hertz.

You got me, that was a crazy train I would never ride and it paid off generously.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#79

Post by onetokeoverthe »

dilippkumar wrote: post #61

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

[dead]

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#80

Post by cjs_ac »

0xffff2 wrote: post #26

Having read the article but not heard of Evergrande prior to this, what are the implications of this outside of China? The article mentions that the company filed for bankruptcy in the US, but not what US operations/developments they had.

This will cause Australia's first recession in over thirty years. Chinese steel is made from Australian iron ore, which is Australia's biggest export.

At the start of the Global Financial Crisis, the Chinese government stimulated the domestic housing market, which was the start of this bubble, but the demand for steel was enough to ensure that Australia suffered no economic downturn at all.

All that's about to come crashing down.

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