On the markets, the week of August 15 opens in the sign of China. Among the most ‘burning’ issues on the table of the second world economy is a real estate sector that returns to the fore for the financial difficulties of the big of the country garden sector and also the rekindling of the tensions with Taiwan. All on the eve of the expected new macro results to outline even more the state of health of China after the recent inflation numbers.
Turmoil in Chinese real estate: the Country Garden case
The Chinese real estate sector is back in the sights. A sector closely followed given that it has long been an important growth engine of the second largest economy in the world, accounting for up to 30% of the country’s GDP. After the collapse of Evergrande two years ago, investor confidence in the real estate sector is once again faltering with the news coming from the real estate giant Country Garden. Shares of the Chinese real estate development group came under pressure again and today recorded a double-digit drop, hitting an all-time low in the wake of the request for suspension from trading of some bonds. At present, the stock market regulator has announced the suspension of eleven of its bonds from trading.
The move followed reports on Friday that the company was embarking on a debt restructuring after missing two coupon payments on its August 6 dollar bonds totaling $22.5 million. . Concerns that highlight the instability of the Chinese real estate sectora pillar of Beijing’s economy, hit by the Evergrande crisis last year. After officials have taken little action so far on stimulus measures, investors are hoping any weakness in tomorrow’s data will prompt policy makers to act“, he comments Gabriel Debach, market analyst at eToro.
Il profit warning
Late last week the company, founded in the early 1990s by Yang Guoqiang, had launched its profit warning, warning the market of a steep loss of up to $7.6 billion in the first part of the year. In detail, Country Garden said in a statement that it could report a loss of 45 to 55 billion Chinese yuan (about 6.2 billion to 7.6 billion dollars) for the six months to June, a figure that it compares with earnings of about 1.9 billion yuan for the same period last year.
A loss that the company also attributed “to the increase in write-downs of real estate projects in the wake of the decline in sales in the sector”. Indeed, the Chinese real estate world is in decline. New home sales by China’s top 100 developers dropped 33% in July from a year ago, according to recent data.
Tensions with Taiwan
In an already uncertain and complex scenario, geopolitical tensions with Taiwan are also rising again. In fact, Beijing’s reaction was strong, condemning the visit to the US by the vice president of Taiwan, William Lai. Tensions between China and the US remain strong after the Biden administration’s tightening on tech investments in China.
Macro sphere, new data tomorrow
On the financial side, however, worrying news is still coming from China. These include new bank loans in July which fell to their lowest since 2009 (thus highlighting low demand from businesses). In light of the difficulties of the Chinese economy, report the strategists of Mps Capital ServicesJuly macro data on retail sales, investment and industrial production due tomorrow morning will be particularly important, “as they could impact broader market sentiment if there is a disappointment”.