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China’s property market woes set to deepen further

  
  Analysis

A potential funding crunch beckons for China’s property sector

Fantasia Holdings is the latest name to have missed out on its debt payment today here and it won’t be the last in this entire saga. For some context, Fantasia was downgraded by S&P to CCC and placed on a negative credit watch at the end of September.
Adding to today’s headlines is the credit downgrade for Sinic by Fitch here.
Evergrande may still be the biggest name but the spillovers and broader impact is starting to surface, and it sure ain’t looking pretty.
A Reuters piece from yesterday highlighted that the aggregate interest coverage ratio (in other words, the ability to repay debt) of 21 big Hong Kong-listed Chinese real estate developers fell to 0.94, the worst in at least a decade:
China
That’s rather concerning and the real fear is that Chinese authorities are going to allow for some of these firms to go under (in trying to make a statement) as they continue their quest to deflate the housing market bubble.
As we look towards the weeks/months ahead, expect to see more headlines surrounding this with a funding crunch looking increasingly likely for China’s property sector.

Another Chinese property development firm missed a debt payment

  
  Analysis
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Bloomberg with the report on a missed payment by Fantasia Holdings.

The news was out overnight so it is not new news, posting as an ICYMI.
Says the Bloomberg report (more at that link above (may be gated) )
  • Fantasia didn’t repay a $205.7 million bond that was due Monday, according to a company statement. 
  • Separately, property management company Country Garden Services Holdings Co. said that a unit of Fantasia didn’t repay a 700 million yuan ($108 million) loan that also came due on Monday and that a default was probable. 
  • Shenzhen-headquartered Fantasia’s management and board “will assess the potential impact on the financial condition and cash position of the Group” stemming from the skipped bond payment, it said. 
Bloomberg with the report on a missed payment by Fantasia Holdings. 

CNN report that Biden tells House progressives spending package needs to be between $1.9 tln and $2.2 tln

  
  Analysis
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Via a CNN report, citing two sources

Biden in a virtual meeting with a group of House progressives on Monday
  • said the top line of the social safety net package needs to come down to somewhere between $1.9 trillion and $2.2 trillion
  • Biden told the group, according to one of the sources, that was the range he felt Sens. Joe Manchin and Kyrsten Sinema would accept but did not specify further within that range.
Climbing down from higher numbers earlier. Less fiscal boost will not be as positive for markets looking for stimulus, but on the other hand getting the thing passed will be positive.

Nasdaq takes it on the chin with a loss of over 2%

  
Analysis, US Market
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Nasdaq lower for the 6th time in 7 days.

The major US indices are ending sharply lower with the brunt of the damage done in the Nasdaq index.
  • The NASDAQ closes at its lowest level since June 22
  • The NASDAQ is down 7.5% from its all-time high
  • The S&P index is closing  5.40% from its all time high.
  • S&P that the lowest level since July 19
  • Facebook fell -4.89% today and is 15% from its all-time high
  • The Dow is -4.57% from its high.

A look at the final numbers for the day are showing:

  • Dow industrial average -323.56 points or -0.54% at 34002.91
  • NASDAQ index -311.20 points or -2.14% at 14255.49
  • S&P index market 56.58 points or -1.30% at 4300.47
  • Russell 2000-24.16 points or -1.08% at 2217.47
The scathing segment on Facebook’s disregard for the safety of their content on 60 Minutes got the ball rolling in the downward direction. There was also on a number of outages at major tech companies including Google, Amazon, Facebook, Twitter, etc., which may have contributed to the negative tone. Of course there is also the fear of slowing growth in China hurting global economies, and higher inflation leading to stagflation.
Feds Bullard gave his usual hawkish comments which did not help things.

Biden: The US always pays its debt

  
  Analysis

Comments from the President

Comments from the President
  •  Raising the debt limit is about paying off old debts, not about new spending
  • Republicans are being reckless and dangerous on the debt ceiling
  • We have to raise the debt ceiling in part due to reckless policies under the Trump administration
  • Says he’s asking Republicans not to use procedural tricks not to raise the debt ceiling
  • Tells Republicans to get out of the way
“If you don’t want to help save the country, get out of the way so you don’t destroy it,” he says. “They need to stop playing Russian roulette with the American economy.”
This charade is going to go on for a little while longer. Pray that it causes a real panic in markets because that would be an incredible dip to buy. The US isn’t going to default.
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