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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. 

Bank of Japan quarterly Tankan report

  
  Analysis
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The BOJ’s Tanki Keizai Kansoku Chousa (Tankan) reports on the Short-Term Economic Survey of Enterprises in Japan

Full report can be found from the Bank of Japan website here.
Headlines via Reuters:

 

  •  September big manufacturers index +18(Reuters poll: 13)
  • December big manufacturers index seen at +14(Reuters poll: 15)
  • September big non-manufacturers index +2(Reuters poll: 0)
  • December big non-manufacturers index seen at +3(Reuters poll: 5)
  • September small manufacturers index -3(Reuters poll: -9)
  • December small manufacturers index seen at -4(Reuters poll: -6)
  • September small non-manufacturers index -10(Reuters poll: -11)
  • December small non-manufacturers index seen at -13(Reuters poll: -9)
  • Japan all firms see dollar averaging 107.64 yen for fy2021/22
  • Japan all firms see euro averaging 126.50 yen for fy2021/22
  • Japan big manufacturers see dollar averaging 106.72 yen for fy2021/22
  • September all firms employment index -17
  • September all firms financial condition index +11 vs june +11
  • September big manufacturers’ production capacity index +1 vs june +1
  • Japan big manufacturers see fy2021/22 recurring profits +12.7%
  • Japan big firms see fy2021/22 capex +10.1% (Reuters poll: 9.1%)
  • Japan small firms see fy2021/22 capex +4.7% (Reuters poll: 1.6%)
  • BOJ September tankan corporate price expectations survey: Japan firms expect consumer prices to rise 0.7% a year from now vs +0.6% in prev survey
  • Japan firms expect consumer prices to rise an annual 1% 3 years from now vs +0.9% in prev survey
  • Japan firms expect consumer prices to rise an annual 1.1% 5 years from now vs +1.1% in prev survey

Apple: Water-resistant iPhones? Not so much

  
  Analysis
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From MacRumors’ “Italy Fines Apple $12 Million for Misleading iPhone Water Resistance Claims” posted Monday:

Apple has been slapped with a 10 million euro ($12 million) fine by Italy’s antitrust watchdog for unfair commercial practices related to its iPhone marketing in the country.

Specifically, Apple is being charged for misleading claims in promotional messages about how deep and how long iPhones can be submerged in water without being damaged…

However, according to the country’s competition regulator, the messages did not clarify that the claims are only true under specific conditions, for example during controlled laboratory tests with the use of static and pure water, and not in the normal conditions of use by consumers.

The regulator also took issue with Apple’s warranty terms, which do not cover damage caused by liquids. The authority considered it inappropriate to push an “aggressive” commercial practice highlighting water resistance as a feature, while at the same time refusing to provide post-sales warranty assistance if the ‌iPhone‌ models in question suffer water damage.

My take: I expect Apple’s warranties to err on the user’s side.

Moderna says its coronavirus vaccine will not be ready until 2021

  
  Analysis
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Moderna CEO Stéphane Bancel statements on Wednesday, carried in the Financial Times overnight ICYMI.

  • will not seek emergency authorization for Food and Drug Administration approval for its vaccine to use in frontline medical workers and at-risk individuals until Nov. 25 at the earliest.
  • company would not seek FDA approval for use in the general population until late January
  • If the vaccine is proven safe and effective, approval is unlikely to come until at least late March or early April
Link to FT, may be gated.

China launched to mid missiles into the South China Sea on Wednesday morning: Source

  
  Analysis
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A source close to the Chinese military

According to a source close to the Chinese military, China launched 2 missiles into the South China Sea on Wednesday morning. The launch was to send a warning to the United States.

According to the source, the missile launch was intended to deny other forces access to the disputed South China Sea region.  Yesterday an American spy plane reportedly neared the Chinese naval drills in the sea.
The US has added 24 Chinese companies to an entity list. That will also impose a visa restrictions as a result of South China Sea tensions.

US election Joe Biden says ‘No new taxes’ for anyone making less than $400,000

  
  Analysis
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Democratic presidential nominee Joe Biden interview in US media (ABC)

  • “I will raise taxes for anybody making over $400,000”
  • “no new taxes” would be raised for anyone making under $400,000
We should begin to get policy announcements such as this in coming weeks.

Link here to the report for more
Biden and Harris:
Democratic presidential nominee Joe Biden interview in US media (ABC)

Chinese officials are clamping down on speculative stock and metal trading – fearful of backlash if prices drop

  
  Analysis
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The Nikkei has the piece on Chinese officials seeking to calm investor fervour:

  • on fears that investor anger in the wake of any financial collapse would stoke discontent with the government
  • Industrial and Commercial Bank of China, a major state-owned lender, notified customers at the end of July that it would cease setting up new accounts for financial products linked to platinum and palladium prices
  • Other banks have taken similar action
  • “This is what the authorities wanted,” said a sales manager at a large bank
Meanwhile, on the other side of the world …
The Nikkei has the piece on Chinese officials seeking to calm investor fervour:

The coming debt and population problem

  
  Analysis
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Death and taxes

Debt levels are set to rise to unprecedented levels. According to the International Monetary Fund in June the public debt, as a share of GDP in advanced economies, is set to come in at over 130% for this year and next. To put that into perspective that surpasses the debt levels from the second world war.If you look at the chart below you can see that the double whammy of the Global Financial Crisis, followed by the present pandemic is pushing debt to record levels.

Death and taxes

 

The population problem

The general thinking now is that the present crisis is a one in a hundred years kind of event (what if it isn’t) and that future generations will be able to claw back the debt levels over time. However, a publication from the Lancet in the UK suggests that there is a falling population that could fall by 9% at the end of the century. So, this means that there will be a large decline in numbers of working age adults. There are some countries which are projected to be particularly badly hit. Japan, Spain, Portugal, and Thailand are expected to see their populations halve by the end of the century. The countries which are projected to see 25% population declines are also projected to see a higher ration of older to younger people. So, more of this debt is going to be shouldered by fewer as an ageing population raises further spending considerations.

What will happen next?

There will be moves by governments to start to cap this debt problem. It will not be allowed to continue unless we get into worst disasters than we presently are in. The main concern is that of default. As long as willingness to repay remains, then the debt pile can be reduced. The main risk is if the debt becomes too great and the easiest solution is to just walk away…

More info on that Russian COVID-19 vaccine: 30 million doses in Russia by end of year and 170 million worldwide

  
  Analysis
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The Russian vaccine speculation is not new, but here is more on it if you need.

Head of its sovereign wealth fund Kirill Dmitriev, chief executive of the Russian Direct Investment Fund, which is financing the country’s vaccine research:
  • Russia aims to secure approval for the first Covid-19 vaccine in the first two weeks of August
  • expects to produce 30 million doses in Russia by end of year and 170 million worldwide
The Russian vaccine speculation is not new, but here is more on it if you need.

USD facing more questions about its status as the primary reserve currency

  
Analysis, Forex
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Here is an item on the US dollar from Bloomberg that may be of interest.

It cites analysts from Credit Agricole and Mizuho
  • USD accounts for more than 60% of global reserves
  • the most widely used currency for international transactions
  • But it risks ceding ground to the euro after European Union leaders agreed on a 750 billion euro stimulus package that enhances the appeal of the shared currency and euro-denominated assets
CA say that the recovery fund will facilitate diversification out of the US dollar
offering liquid, high-rating, euro-denominated debt
Here is an item on the US dollar from Bloomberg that may be of interest.
I’d not be getting too gung-ho on this, and note that the analysts say ‘risks ceding ground’, they are not writing off the dollar.
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