Walker Laurent Inc News
Debt can Kill
Evergrande, the Shenzhen-based Chinese property behemoth, employs directly 200,000 people and indirectly over 3.5 million on property projects and project developments. It is China's second-largest property company by sales, and any perusal of its activities on Wikipedia will clearly illustrate its importance.
It is now in very deep financial trouble. In recent weeks its cash crisis has worsened, having already defaulted on some commercial paper. Currently listing at least $300 billion or more in total liabilities, a major default could ensue if it cannot raise money quickly by September the 20th.
Furthermore, the collateral damage and financial fallout from its failure could have [systemic risk] severe and widespread implications to its many suppliers and lenders as the 'domino effect' ignites.
Earlier in September, investors and those that had deposited cash to secure apartments and condos in Evergrande's prebuild sales pitch were demanding answers and refunds, which at the end of June stood at around $200 billion in pre-sales deposits alone, as they besieged the company's headquarters in protest.
Evergrande's plight has raised concerns across the entire Chinese property sector that a rapid contagion affecting more than 25% of China's economy could develop. The consequences of which would inevitably hit Banks and investors heavily exposed and also could lead to social unrest, a taboo in the CCP playbook. Such a 'systemic event' would represent the most significant threat to China's overall financial health in many years
Markets generally are presently sanguine about the possibility of imminent default on an approaching interest deadline of September 20th. Many commentators feel the PBOC, China's Central Bank, will, as lender of last resort, move to forestall such an eventuality given the total indebtedness and exposure could represent as much as 2% of China's GDP.
While outside mainland China, Evergrande had been acquiring land for development and building residential developments and trophy buildings in HK, which it is currently trying to sell.
Evergrande has been spending billions of dollars diversifying into European automobile technology, acquiring stakes in Koenigsegg [supercar company], Dutch e-Traction, Hofer AG [powertrain company], British Protean, and Swedish NEVS.
Evergrande's stock price in HK has collapsed in the past 12 months from over $20 to $6 a month ago and to $2.50 as of this writing.
A Buy only for the bravest of gamblers who can afford to lose.