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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

#111

Post by SomeoneFromCA »

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.

Mandatory liberatarian "let the market decide" post.

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

#112

Post by oblio »

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? It's all just numbers on papers or memory.

Pardon my French, numbers on paper my ass.

Economic uncertainty leads to people killing themselves. Suicide rates go up during recessions and depressions.

https://www.frontiersin.org/articles/10.3389/fpubh.2022.9070...

> In general, economic crisis, unemployment rate and other macroeconomic measures are associated with increased risk of suicidal behavior at the aggregated level.

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

#113

Post by SomeoneFromCA »

csomar wrote: post #59
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.

They have $340bn of debt; even if they default on the whole amount, it's only 10% of China currency reserves. The problem, however, is not the nominal amount but how the company network is inter-connected with other companies (either abroad or locally). This amount, albeit not colossal (by China relative size) could trigger effects in other companies that will lead to their failure. This will go on until it becomes a…

340bn is the official account. the true number is unknown. And there are millions of other smaller developers who is indebted too.

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

#114

Post by Gareth321 »

secondcoming wrote: post #109
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?

There are videos online that show the deplorable construction standards used in some of these houses.

Yeah many of these apartment buildings are so bad no one can move into them. They're often demolished a few years later. Construction standards just don't exist in China, and people are forced to continue paying mortgages on these properties under threat of prison. Given this extraordinary position of power and laissez-faire, the major construction companies have been way over-leveraging. Most analysts are confused as to why it has taken so long for the industry to collapse. The prevailing sentiment is that the government keeps stepping in every time another company is ready to fall. Eventually the government will just own all the construction companies directly, and the CCP has a poor investment and management track record.

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

#115

Post by oblio »

cjs_ac wrote: post #80
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 c…

Ouch, that's going to hurt:

https://commons.wikimedia.org/wiki/File:Australia_Product_Ex...

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

#116

Post by sam_goody »

ben_w wrote: post #76
slushh wrote: post #68

Earlier quoted context omitted.

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…

>> What's the worst that can happen?

> The Great Depression, the Great Recession.

If China descends into chaos, it could be alot worse than the Great depression, since so much of the world depends on China, and since they have a crazy arsenal of weapons.

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

#117

Post by Sakos »

noobermin wrote: post #15
irjustin wrote: post #7

Earlier quoted context omitted.

Government needs to step in and investors need to write it as a total loss. Making people pay could collapse the entire economy.

Could someone key me in to this? I thought generally the Chinese government never shied away from stepping in and manipulating things. Recent trends (for example, the government blaming young people themselves for their low employment numbers) feels like they imported the bootstraps mindset from American politicians, which seems out of step with what was seen as them being rather direct in control of their economy. R…

They seem to be aware of the dangers of perverse market incentives and they also know the real estate market is completely shot. Propping up Evergrande doesn't fix the underlying issues while letting it fail would not just wipe out the wealthy, it would have severe negative impact on the middle class and everybody working in construction.

People here are all "let it fail" and don't seem to care about how many millions of people would be drastically affected. These are people's lives we're talking about. Stop waving it away as if it doesn't matter. The callousness here is appalling.

Also, don't look at what some politician says, regardless of country. What's important is what they do about perceived issues.

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

#118

Post by seanmcdirmid »

rdsubhas wrote: post #95
seanmcdirmid wrote: post #91

Earlier quoted context omitted.

If they stop paying the mortgage, the bank can foreclose on their non-built house. Frankly speaking, the government is probably going to bail all of these people out; if they don’t the whole real estate sector could fall over. The practice of selling houses yet built is not limited to Evergrande.

In most countries, if they stop on their mortgage, the bank can come after all their assets to recoup. Not just the non-built house.

In most countries, you aren’t able to even get a mortgage on a house the bank can’t put a lien on. The banks are actually complicit here, but they are mostly state owned, so the government will manage fall out here in the direction away from social unrest.

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

#119

Post by csomar »

slushh wrote: post #70
csomar wrote: post #59

Earlier quoted context omitted.

They have $340bn of debt; even if they default on the whole amount, it's only 10% of China currency reserves. The problem, however, is not the nominal amount but how the company network is inter-connected with other companies (either abroad or locally). This amount, albeit not colossal (by China relative size) could trigger effects in other companies that will lead to their failure. This will go on until it becomes a…

Would it be worthwhile to create the insights? E.g. if there were a global registry of credit dependencies and ownership, at least for system relevant companies, we should know what is going to happen. But what is the worst that could happen? If companies fold, ownership will be transferred. As long as the companies are profitable, their business will continue.

That will mean companies won't have any privacy at all (all info will need to be public) and essentially centralize them into a single "massive" world company. It didn't work back then (it's similar to communism in that sense) and I don't think it'll work now (it's every bureaucrat wet dream).

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

#120

Post by woooooo »

Sakos wrote: post #106
aden1ne wrote: post #98

Earlier quoted context omitted.

Note this isn't merely a Chinese thing. A variation of this is in fact the default way new units get build and sold in the Netherlands, for example. Personal anecdote. I had a mortgage for 2 full years before being able to move in to my apartment because I bought it before a single stone was laid. The way this works here is that the money is held into an escrow account for most of time, with the construction company…

I would have to assume the company didn't use those payments to fund the building of properties for earlier mortgages. The Ponzi scheme nature of it is the Chinese thing (not that it has anything to do with being Chinese, it's just the reality of Chinese real estate today and of the past decades). Paying for the construction of a new home in installments is something done across the world.

If previous poster's description is correct, they would have to, right? Or have a revolving fund of debt which is the same thing with extra steps. Builder doesn't get paid until after building things, the construction has to be paid for somehow.

I guess the money being in escrow puts the risk on the builder instead of the buyer.

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