Chinese equities have been on a roller-coaster ride in 2021 with aggressive regulatory moves out of Beijing smacking the likes of Alibaba (BABA US) and Tencent (700 HK), now investors’ attention has switched to the troubles surrounding property empire China Evergrande (3333 HK). Mr Xu has seen the shares in one of Chinas largest property group collapse over 90% since last October decimating his $US30bn wealth along the way, the company has unfortunately evolved from the worlds most valuable to the most indebted property group – $US300bn and counting.
Creditors are already happily accepting 30c in the dollar and tens of thousands of people are fretting their deposits for new apartments may vanish into thin air. President Xi Jinpin has been quoted as saying “housing is for living in, not for speculation” and as such the government may stabilise property prices but speculators and developers should hope their debt levels are manageable. With property developers accounting for around 50% of Chinas steel demand its not hard to comprehend the demise in iron ore prices. The bulk commodity was already under pressure from a government focused on meeting strict emission targets however its all about balance and an end to construction will decimate employment in China which brings with it discontent, good luck President Xi.
MM is bullish Emerging Markets equities into current weakness courtesy of China
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