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So, how much of a concern is Evergrande's impending default ($300B in debt)?
With more than $300 billion of liabilities, Evergrande may roil lenders, suppliers, small businesses and millions of homebuyers should it collapse. Chinese authorities have kept quiet about their plans for the company so far, aside from urging it to resolve its debt risks.
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@tim said in Is this thing sustainable?:
So, how much of a concern is Evergrande's impending default ($300B in debt)?
With more than $300 billion of liabilities, Evergrande may roil lenders, suppliers, small businesses and millions of homebuyers should it collapse. Chinese authorities have kept quiet about their plans for the company so far, aside from urging it to resolve its debt risks.
IIRC, Lehman Brothers was about $600B.
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@tim said in Is this thing sustainable?:
@tim said in Is this thing sustainable?:
So, how much of a concern is Evergrande's impending default ($300B in debt)?
With more than $300 billion of liabilities, Evergrande may roil lenders, suppliers, small businesses and millions of homebuyers should it collapse. Chinese authorities have kept quiet about their plans for the company so far, aside from urging it to resolve its debt risks.
IIRC, Lehman Brothers was about $600B.
It's a concern which will jolt the market if it goes down ... but very different to Lehman in that it's much less linked. 300B is a lot, but is quite easily recoverable depending on how much it's spread.
Lehman is kind of like a city's water supply being tainted - everybody is affected. Evergrande is a bit more like a suburb having a long term blackout. Much more meaningful to those directly involved, but less affect outside the area.
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@majorrage Thanks dude. I was particularly interested in this incident as it involved real estate, which seems to be a huge sink for debt and currency since the last GFC.
Does that make this a bigger risk indicator than a normal corporate default?
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@tim said in Is this thing sustainable?:
@majorrage Thanks dude. I was particularly interested in this incident as it involved real estate, which seems to be a huge sink for debt and currency since the last GFC.
Does that make this a bigger risk indicator than a normal corporate default?
I don't know enough about Evergrande really to comment on that. It really depends on what they have their teeth into. IF it's mainly Chinese property (residential / commercial etc) then it'll be a lot less interesting than if they have much invested elsewhere.
I had seen this mentioned on a few "previous life" chats that I'm on, but there doesn't seem to be too much panic.
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@tim said in Is this thing sustainable?:
So, how much of a concern is Evergrande's impending default ($300B in debt)?
With more than $300 billion of liabilities, Evergrande may roil lenders, suppliers, small businesses and millions of homebuyers should it collapse. Chinese authorities have kept quiet about their plans for the company so far, aside from urging it to resolve its debt risks.
Wouldn't Evergrande at least have actual assets?
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@antipodean said in Is this thing sustainable?:
@tim said in Is this thing sustainable?:
So, how much of a concern is Evergrande's impending default ($300B in debt)?
With more than $300 billion of liabilities, Evergrande may roil lenders, suppliers, small businesses and millions of homebuyers should it collapse. Chinese authorities have kept quiet about their plans for the company so far, aside from urging it to resolve its debt risks.
Wouldn't Evergrande at least have actual assets?
So did the mortgage backed securities holders.
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@tim said in Is this thing sustainable?:
@antipodean said in Is this thing sustainable?:
@tim said in Is this thing sustainable?:
So, how much of a concern is Evergrande's impending default ($300B in debt)?
With more than $300 billion of liabilities, Evergrande may roil lenders, suppliers, small businesses and millions of homebuyers should it collapse. Chinese authorities have kept quiet about their plans for the company so far, aside from urging it to resolve its debt risks.
Wouldn't Evergrande at least have actual assets?
So did the mortgage backed securities holders.
I'm not terribly au fait with this, but apart from Evergrande's willingness to be heavily geared, at least their debts aren't supposed to be phantom loans for strippers owning four homes? I.e. there's actually something behind the mask?
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@antipodean The $14T question ...
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It’s hard to know really because the Chinese are so opaque. They should have substantial assets but there’s a real possibility that they have been overstated. However in that market so could their debts. The regulators don’t seem to work to the same standards that western jurisdictions do.
The impact isn’t like that from Lehman’s, who were systemically embedded into the market. It wasn’t just that Lehman’s owed money, it was who they owed money to. Their demise created a logjam of defaults That then cascaded throughout the financial system. That obliged a huge number of banks to try and realise assets only to find that their assets weren’t real at all, in spite of what the credit agencies had been telling them.
I will be surprised if any of the major global players have much exposure to Evergrande.
It may have quite an effect on the Chinese market though, and if there is a major contraction the reduction in demand could be enough to trigger recessions. But they are survivable.
Although I have wrongly overestimated institutional competence before.
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i just saw an interesting graph where the iron ore price and the Evergrande share price were freefalling together
this could have huge ramifications in Australia
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@mariner4life said in Is this thing sustainable?:
i just saw an interesting graph where the iron ore price and the Evergrande share price were freefalling together
this could have huge ramifications in Australia
and especially so in our new nation state WA
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@voodoo said in Is this thing sustainable?:
@mariner4life said in Is this thing sustainable?:
i just saw an interesting graph where the iron ore price and the Evergrande share price were freefalling together
this could have huge ramifications in Australia
and especially so in our new nation state WA
i had a chuckle at that point.
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Curious to see if Chinese investors in Aus properties suddenly have to liquidate as well
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The sequencing trap that risks stagflation 2.0
Is this thing sustainable?