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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

#131

Post by treis »

ww520 wrote: post #104
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…

The problem started long time ago when the central government took most of the tax revenue from the local provincial and city governments leaving them without funding to operate. As a compensation, they were granted the authority to sell the land use right of their lands. Land is never privately owned in China. What is sold is the right to use the land for a period of time. Since the state owned all the lands and the…

>Even the central government has no money.

They have several trillion in US Dollars.

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

#132

Post by arthur2e5 »

jamesaurichs wrote: post #69
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…

1.) "The demand side is mostly people buying second and third units as investments." that is incorrect. Most purchases are first purchases from couples that want to get married, and a home purchase is a required dowry from men that they need in order to get approved for marriage from the parents. There are famous online videos from newlyweds that purchased a condo from a few years ago, and have been documenting their…

Note that recent low birthrate i.e. (2) does not immediately map to shrinking real estate demands: young people born 20-30 years ago are still moving to cities, looking for a job, and a place to sleep in, hopefully with not-too-long commutes. There will still be a bunch of young couples trying to get a home and being ruined by unfinished construction like you've mentioned.

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

#133

Post by IG_Semmelweiss »

rightbyte wrote: post #125
landemva wrote: post #97

Earlier quoted context omitted.

Instead of default the bad debt and a recession, what alternative is there? Prop it up a little longer? Default on everything, go to CBDC, and issue everyone monthly CBDC tokens to buy food?

I guess you could forgive the loans people took for houses that were not built and let the bond holders share the hit.

I think some of the bondholders are banks. The others are ccp cadre.

That will trigger a run.

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

#134

Post by mattbrewsbytes »

re-thc wrote: post #72
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…

I think the demographics aren't in a "weird situation" ... they have significant population decline. Baby boomers is a generation across the planet with varying years in each region or country and generations behind them are smaller everywhere. China also had a 1 child policy for a long time so this has resulted in fewer people. Fewer people (smaller generation) having fewer people results in fewer people, which ... you get it. You can't create more 30-40 year olds right now. Massive real estate growth doesn't correlate with the population. Either people or companies are going to get stuck with the costs, I doubt the government is going to prop up the company.

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

#135

Post by machina_ex_deus »

irjustin wrote: post #103
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…

> Thing is, all four of these can not possibly be right. It’s a little too insane. Whoever is on the other side of all those mortgages should have abandoned ship a long time ago otherwise. Why can't all 4 of these be right? "A little too insane" defines every bubble in hindsight. Point to a bubble w/ a collapse and I'll give you a set of statements that are "a little too insane" such that fundamentals don't hold up.…

GameStop? that wasn't a bubble, everyone buying it knew fully well that there are no fundamentals and that they are buying it to cause a short squeeze on hedge funds who shorted too much stock. Some of them got huge gains, others kept chasing the trade after it was over.

But it definitely wasn't a bubble. It was a good trade and there were some FOMO losers who kept chasing it more than they should.

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

#136

Post by IG_Semmelweiss »

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.

>>>>deplorable construction standards used in some of these houses.

I read "deplorable construction standards in some of these tree houses. "

I was about to question your statement...

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

#137

Post by Sakos »

woooooo wrote: post #120
Sakos wrote: post #106

Earlier quoted context omitted.

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.

Iirc, Evergrande took on debt to pay for construction and used the money paid by customers to service those debts. That's the missing step.

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

#138

Post by throwawaylinux »

seanmcdirmid wrote: post #86
jamesaurichs wrote: post #67

Earlier quoted context omitted.

There are a number, and I mean a large number of issues. I'll just pick a few 1.) as of 2021, There are nearly 800 unfinished Evergrande projects in more than 200 cities across China. https://www.nytimes.com/2021/09/28/business/china-evergrande... . Even if the buildings were unfinished, the buyer still had to keep paying the mortgage!! and if they didn't, and the courts foreclosed the property and sold it, the buyer…

> yeah, and because Chinese citizens are outraged by Fukushima release, they are boycotting Japanese seafood, and in general all seafood, which has decimated the entire seafood industry in China overnight, with no traffic to seafood market or restaurants. This one is hilarious. China imports very little seafood from Japan, and they just single handedly tanked their domestic seafood industry for a few bananas worth of…

So Japan's dumping of radioactive waste into the ocean might just be one of the greatest things ever done for marine life.

This could be the first time in history that the "green" / petroleum alliance's anti-nuclear FUD has ever had a positive outcome for the environment.

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

#139

Post by NotYourLawyer »

paulpauper wrote: post #100
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.

that is not how bankruptcy works. it does not mean everything zero. it is process of paying creditors. what is left is paid to shareholders.

Right. But assets < liabilities means that “what is left” is nothing.

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

#140

Post by matwood »

SomeoneFromCA wrote: post #113
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…

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

> 340bn is the official account. the true number is unknown.

China is very good at controlling the real numbers that come out. Something like Evergrande failing can't be hidden, and could be the tip of the iceberg of much bigger issues coming to light.

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