“Investors are bracing for more debt defaults among China’s cash-squeezed real estate developers as funding costs surge and refinancing pressure intensifies.
“Borrowing costs in dollars for China’s high-yield issuers, most of whom are property developers, almost doubled this year to 11.2 percent, the highest in about four years, ICE BofAML indexes show. To make things worse, the sector faces a record $18 billion bond maturities in both onshore and offshore markets in the first quarter of 2019. That number is expected to double if investors demand early repayment on some of these notes, according to Bloomberg-compiled data.
“China’s property developers have been caught in the storm of a funding crunch facing the nation’s private sector due to a two-year long clampdown on shadow financing. Although authorities have rolled out measures to ease funding for non-state firms, the existing property control policies won’t loosen, the official Xinhua New Agency said in a commentary last week. At least four property-related firms defaulted on notes this year…
“Chinese home price gains slowed in September for the first time in half a year, adding to signs of a residential property market slowdown triggered by the government’s housing curbs. S&P Global Ratings expects more failures in the sector in the coming year….
“”We could see more defaults among Chinese property developers next year as dollar funding costs are now at record high for even some of the big names amidst large amount of bonds coming due, while sales outlook are not that promising with consumer sentiment deteriorating,” Christopher Lee, managing director of corporate ratings at S&P, said in an interview.”
“For years, companies selling luxury goods have counted on China for growth.
“They relied on Chinese consumers for a third of their global sales. But the momentum appears to be slowing as some in the middle class cut back to cope with swelling bills and shrinking wealth.”
“Business activity in China expanded at the slowest pace for over two years at the start of the fourth quarter, according to the latest Caixin PMI data. October saw the export-led slowdown spread beyond manufacturing to the service sector. “Softer demand conditions hint at the risk of a further slowdown in the coming months.”
“The Asian equities are on the defensive on renewed US-China trade jitters…
“Meanwhile, assurances from President Xi have, so far, failed to put a bid under the Chinese equities, leaving the Shanghai Composite down 1.06 percent on the day.”
“Small and midsize manufacturing firms in South Korea have suffered the sharpest drop in output in nine years in 2018 due mainly to a slump in the country’s automaking and shipbuilding sectors, government data showed Monday. Production by smaller manufacturers with fewer than 300 employees shrank 4.3 percent on-year in the first nine months of 2018…”
“Indonesia has been grappling with a slumping rupiah from an emerging market selloff with the unit at levels last seen during the late-nineties Asian financial crisis.
“The country’s central bank has raised its key rate five times since May after the government said it was taking other measures to protect the weak currency.”
“Iranians are bracing for the full force of US sanctions due to hit on Monday as the Trump administration reimposes an embargo on oil…
“Iran has remained defiant, saying it is confident it can weather the impacts, and that the US will fail to bring down Iranian oil imports to zero. But ordinary people, wary of the fluctuations of the currency and the rising prices of goods, are anxious.”
“Turkey’s consumer inflation accelerated more than expected last month as the weak lira continued to fuel price gains.
“The inflation rate rose to 25.2 percent from 24.5 percent in September, above the median estimate of 25 percent predicted by economists in a Bloomberg survey.”
“Tunisian woes can be traced back to the country’s economic problems, amongst other things… For many Tunisians, however, the post-revolutionary period has not brought the economic benefits they were promised or expected… with the Tunisian government still heavily subsidising basics such as milk and oil against a backdrop of a worsening economic situation has resulted in these products being sold on the black market…”
“While the UK’s chaotic withdrawal has become a dreary process to be managed, the EU is being dealt hammer blows from elsewhere – from crises that really could make or break the bloc – Foremost on the list of problem zones right now is Italy. “Nothing and nobody, no big or small letter will make us backtrack,” the country’s deputy prime minister, Matteo Salvini, and leader of the far-right League, told his followers in a Facebook video made in his office in Rome on Friday. “Italy will no longer be a slave and will no longer kneel down.””
“2018 is on course to be the worst year since the financial crisis for shares in investment companies.”
“Non-financial corporate debt is at an all-time high in absolute numbers and compared to GDP. The composition of the debt is far riskier than what we have seen historically.
“The leverage in the non-financial corporate debt has the potential to accelerate a market downturn significantly.”