China’s fourth-largest developer (by sales) is approaching a possible default

  • China’s fourth-largest developer by sales is approaching a possible default
  • the sector’s liquidity crisis shows no sign of easing despite government vows of suppor
  • Some of Country Garden Holdings Co.’s dollar bonds were poised for their biggest drops in two months.
  • Sunac China Holdings Ltd.’s grace period to make a dollar-bond interest payment ends Wednesday,
  • Failure to do so could trigger cross-default on other offshore debt, the bond’s prospectus shows.
china evergrande property

BlackRock sees a ‘rapidly worsening’ outlook for China’s economy – downgrades equities

BlackRock is the world’s largest asset manager, has circa US$10 tn in assets under management.

In a report issued Monday it (in brief) it highlighted two key concerns it has over China:

  • Said risks are rising for China over its ties to Russia during the Ukraine war
  • COVID-19 related lockdowns further threaten to slow economic activity in China

Thus Blackrock cut its view on Chinese equities to neutral, from previously overweight.

Weekly candles for the Shanghai Composite. Far be it from me to question the undoubtedly smart peeps at BlackRock … but still ….

weekly shanghai comp 10 May 2022

Federal Reserve Financial Stability report out now – identifies liquidity risks

The report is here:

Financial Stability Report

As you’d expect, its a chunky document (researchers and analysts at the Fed gotta research and analyse, right?). From the ‘overview’ a bit of a summary:

  • Since the November 2021 Financial Stability Report, uncertainty about the economic outlook has increased. The Russian invasion of Ukraine has caused tremendous human and economic hardship, and the implications for the U.S. and global economies are highly uncertain. In the near term, the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity. After deteriorating early in the period because of the emergence and spread of the highly contagious Omicron variant, the pandemic outlook has improved but remains uncertain. Finally, inflation has been higher and more persistent than expected, even before the invasion of Ukraine, and uncertainty over the inflation outlook poses risks to financial conditions and economic activity.

News wires have various headline items, this is a good one and nails current concerns:

  • Fed warns of ‘negative feedback loop’ as market liquidity deteriorates
fed financial stability 10 May 2022
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