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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

#81

Post by barkingcat »

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…

These questions indicate a misunderstanding of how markets inside China work. I suggest you don't look at "what makes sense" but more look at the reality of what's happening.

What you are also missing is that sometimes, parties are not allowed to abandon ship. Couples who have bought homes with mortgages but are not moved in for years are not allowed to give up, they are not allowed to stop paying on threat of imprisonment.

The organizations on the countersign are also not allowed to give up on mortgages because the existence of their company is at the will of the government.

There was an uprising where people banded together and just stopped paying their mortgages and basically threatened the local police to mass arrest them, and that's one of the things that spurred the greater bankruptcy, because the government didn't really want to arrest all the people, cause that would indicate they are not in control. And seeming to be in control is what the government will opt for every single time in every single decision they make.

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

#83

Post by seanmcdirmid »

agilob wrote: post #64
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?

>The houses that they've built are still standing No, they are demolishing whole empty cities to keep the prices up. https://asia.nikkei.com/Spotlight/The-age-of-Great-China/Con... https://www.youtube.com/watch?v=8AuWH2GdH1w

These probably aren’t the homes Evergrande has sold, mostly in south China. Ordos Kangbashi will never be populated because coal is on the way new out, a true ghost city that is only categorized as a success via goal post moving and lots of demolition (Ordos itself isn’t a ghost town, just this new district).

The article talks about buildings in kunming being demolished. While kunming definitely went through a big bubble, I would hardly call it a ghost town now.

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

#84

Post by eweb101 »

simonh wrote: post #54
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?

Evergrande sells apartments before they are built to fund construction, and the purchasers pay mortgages during the build. If the company has insufficient funds to complete ongoing construction, which gets delayed, purchasers stop paying their mortgages and the company goes into a death spiral. Meanwhile purchasers get shafted, buildings stand uncompleted, and construction workers and materials suppliers see demand c…

This creates a situation where developer and homeowner interests aren’t aligned. Once the developer receives the money, they are not incentivized to deliver the house on time or do quality construction.

The other model, where investors fund development before the house is sold, aligns both parties. The developer/investor wants to produce a good product so that it will sell at a high price and the buyer has the chance to inspect the property before purchasing.

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

#85

Post by riffraff »

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.

If the assets are worth 10 but the debt is 100, creditors will not have anything of value transferred, and will have to write down a loss.

This could be a small impact or a big one.

If you are a person who was relying on those assets for income for your retirement this might mean you no longer have enough to live by. If you are a company you might in turn be forced to fold. If you're a stablecoin that bought evergrande bonds you might be forced to show you have no baking of your emissions..

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

#86

Post by seanmcdirmid »

jamesaurichs wrote: post #67
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 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 radiation.

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

#87

Post by matheusmoreira »

irjustin wrote: post #7
xwdv wrote: post #4

Feels bad for the people paying mortgages for homes they’ll never get to see. They can’t just stop paying either. Doesn’t work that way.

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

We're all gonna pay either way. Probably in the form of inflation.

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

#89

Post by itronitron »

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.

Worst that can happen? If banks have used peoples' savings to purchase Evergrande debt or anything related then the banks may not get repaid which would result in the banks losing peoples' money leading to people spending less money resulting in a recession or depression.

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

#90

Post by quickthrower2 »

petesergeant wrote: post #82
raincole wrote: post #41

Earlier quoted context omitted.

PSA: this is not how stock price works.

I thought it was; help me understand where I'm wrong.

The probability distribution is not binary win/lose
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