Stress in China’s Credit Market Spills Over to Financial Stocks

[striver44]

(Bloomberg) -- The default of a Chinese coal miner has triggered mounting concern over the health of state-owned firms and their lenders.

The SSE 50 Index of Shanghai’s largest stocks slumped as much as 2.3% on Friday, led by banks and insurers. Bonds of Chinese commodity producers have fallen this week after Yongcheng Coal & Electricity Holding Group Co. defaulted on a 1 billion yuan ($151 million) note.

Coal miners are canceling planned sales of local bonds or extending pricing deadlines as investors turn sour on the sector. Confidence in state-linked firms has already taken a hit following reports Beijing’s local officials were sent to review the finances of prominent Chinese chipmaker Tsinghua Unigroup Co. The company is seeking creditor approval to delay most of the principal repayment on a local bond due Nov. 15, people familiar with the matter said Friday.


There has been a resurgence of credit stress in recent months as several high-profile firms come under financial strain amid the global pandemic. Fears of a credit crunch at China Evergrande Group rippled through the Asian market, while provincial authorities pushed for a court-led restructuring to resolve debt woes at a state-run automaker linked to BMW AG earlier this month.

The string of defaults has prompted at least six Chinese banks to cut their holdings of corporate bonds, with some focusing on notes sold by state-owned firms.

“The market fears more unexpected defaults will come,” said Xiangjuan Meng, an analyst at Shenwan Hongyuan Securities. “Investors are selling riskier bonds at lower prices. Some funds and products may face redemptions.”

Read more: A Big Trader of Evergrande Bonds Braces for More Wild Swings

While support from the central bank has helped ease defaults, stress has continued to be elevated. Onshore delinquencies reached 92.9 billion yuan so far this year, compared to 117.5 billion yuan for the same period in 2019. By contrast, offshore payment failures climbed 350% to $8.1 billion after another university-linked firm was put under debt restructuring earlier this year.

Chinese dollar bond spreads widened by 1.9 percentage points Thursday, the most since Sept. 25, ending seven straight days of tightening, Bloomberg-compiled data show. Spreads on AAA rated local bonds have climbed to the highest in a month.

Banks Slide

Shares of Industrial Bank Co. and China Everbright Bank Co. fell more than 3.4% on Friday. An index tracking stocks of state-owned enterprises lost 0.8%, its fourth day of losses.

“The credit debt market woes involve some pretty highly rated listed companies and their yield to maturity levels are now close to those of junk debts,” said Dai Ming, a fund manager at Hengsheng Asset Management Co. “Some investors worry that bad loan ratios at banks will spike too.”

China’s $45 trillion banking industry suffered their worst profit slump in more than a decade this year after being put on the front-line in helping millions of struggling businesses hurt by the pandemic. As part of the response, China has allowed many borrowers to delay interest and principal payments to March next year, which is hiding the true sense of the bad debt bulge.

The industry’s non-performing loans climbed to a record 2.84 trillion yuan as of Sept. 30, according to the banking regulator. S&P Global estimated earlier this year that the non-performing asset ratio, a more stringent measure of troubled advances that includes forborne loans, could almost double to 10% from pre-outbreak levels this year. That’s a projected increase of 8 trillion yuan.

Stress in China’s Credit Market Spills Over to Financial Stocks

(Bloomberg) -- The default of a Chinese coal miner has triggered mounting concern over the health of state-owned firms and their lenders.The SSE 50 Index of Shanghai’s largest stocks slumped as much as 2.3% on Friday, led by banks and insurers. Bonds of Chinese commodity producers have fallen...

finance.yahoo.com

 

[retaxis]

West doesn't know how China system works. They only interperate it from western perspective and is always proven wrong. China keeps rising more and more powerful while America is soon to be a hispanic country that will kowtow to Chinese overlords.

 

[Menthol]

The grim reality of the world today...

There are so many people fall into the debt trap.

If we still remember USA-Europe credit crisis a decade ago, and read the news about South Korea credit card crisis...

Not to mention all the under-reported credit problems in China, Japan, SE Asia, South America, etc... the best is by seeing their suicide report each year.

And then coronavirus...


In the modern era, everyone looks fine and wealthy, but inside everyone has unspeakable problem.

Humanity is basically good and kind, but if you put in the bad situation, who is not stressed and frustrated?


This is the major issue of the world today.

West doesn't know how China system works. They only interperate it from western perspective and is always proven wrong. China keeps rising more and more powerful while America is soon to be a hispanic country that will kowtow to Chinese overlords.

What is the different between China and the West?

Related to the credit and debt problem?

 

[Viva_Viet]

(Bloomberg) -- The default of a Chinese coal miner has triggered mounting concern over the health of state-owned firms and their lenders.

The SSE 50 Index of Shanghai’s largest stocks slumped as much as 2.3% on Friday, led by banks and insurers. Bonds of Chinese commodity producers have fallen this week after Yongcheng Coal & Electricity Holding Group Co. defaulted on a 1 billion yuan ($151 million) note.

Coal miners are canceling planned sales of local bonds or extending pricing deadlines as investors turn sour on the sector. Confidence in state-linked firms has already taken a hit following reports Beijing’s local officials were sent to review the finances of prominent Chinese chipmaker Tsinghua Unigroup Co. The company is seeking creditor approval to delay most of the principal repayment on a local bond due Nov. 15, people familiar with the matter said Friday.


There has been a resurgence of credit stress in recent months as several high-profile firms come under financial strain amid the global pandemic. Fears of a credit crunch at China Evergrande Group rippled through the Asian market, while provincial authorities pushed for a court-led restructuring to resolve debt woes at a state-run automaker linked to BMW AG earlier this month.

The string of defaults has prompted at least six Chinese banks to cut their holdings of corporate bonds, with some focusing on notes sold by state-owned firms.

“The market fears more unexpected defaults will come,” said Xiangjuan Meng, an analyst at Shenwan Hongyuan Securities. “Investors are selling riskier bonds at lower prices. Some funds and products may face redemptions.”

Read more: A Big Trader of Evergrande Bonds Braces for More Wild Swings

While support from the central bank has helped ease defaults, stress has continued to be elevated. Onshore delinquencies reached 92.9 billion yuan so far this year, compared to 117.5 billion yuan for the same period in 2019. By contrast, offshore payment failures climbed 350% to $8.1 billion after another university-linked firm was put under debt restructuring earlier this year.

Chinese dollar bond spreads widened by 1.9 percentage points Thursday, the most since Sept. 25, ending seven straight days of tightening, Bloomberg-compiled data show. Spreads on AAA rated local bonds have climbed to the highest in a month.

Banks Slide

Shares of Industrial Bank Co. and China Everbright Bank Co. fell more than 3.4% on Friday. An index tracking stocks of state-owned enterprises lost 0.8%, its fourth day of losses.

“The credit debt market woes involve some pretty highly rated listed companies and their yield to maturity levels are now close to those of junk debts,” said Dai Ming, a fund manager at Hengsheng Asset Management Co. “Some investors worry that bad loan ratios at banks will spike too.”

China’s $45 trillion banking industry suffered their worst profit slump in more than a decade this year after being put on the front-line in helping millions of struggling businesses hurt by the pandemic. As part of the response, China has allowed many borrowers to delay interest and principal payments to March next year, which is hiding the true sense of the bad debt bulge.

The industry’s non-performing loans climbed to a record 2.84 trillion yuan as of Sept. 30, according to the banking regulator. S&P Global estimated earlier this year that the non-performing asset ratio, a more stringent measure of troubled advances that includes forborne loans, could almost double to 10% from pre-outbreak levels this year. That’s a projected increase of 8 trillion yuan.

Stress in China’s Credit Market Spills Over to Financial Stocks

(Bloomberg) -- The default of a Chinese coal miner has triggered mounting concern over the health of state-owned firms and their lenders.The SSE 50 Index of Shanghai’s largest stocks slumped as much as 2.3% on Friday, led by banks and insurers. Bonds of Chinese commodity producers have fallen...

finance.yahoo.com

Thats why I said CN manufacturing sector is dead already due to high labor cost and trade war. Even a coal miner company that just need to dig coal and sell also cant survive, let alone another shoes,garment, phone assembly factories that facing a strong competition from Samsung and VN factories.

 

[ozranger]

Thats why I said CN manufacturing sector is dead already due to high labor cost and trade war. Even a coal miner company that just need to dig coal and sell also cant survive, let alone another shoes,garment, phone assembly factories that facing a strong competition from Samsung and VN factories.

They are actually upgrading the industrial structures. So 5G (worth noting they are focusing on IoT not phones), AI and robotics are what they are working towards. Of course lower value products will be moved to Vietnam or Bangladesh. But they will strive to retain higher value products in China.

I actually saw a demo when I visited China for once about one year ago. That was a highly automated dress design and making system with a workflow starting from body measuring by a consumer using a mobile phone straight to getting the dress made. The design, making and delivery processes go across a couple of different provinces, using 5G, IoT, AI and robotics, with and without human intervention at different stages.

As told the same process can also be applied to shoe making. So consumers get highly customised products with quick delivery.

Finally dresses and shoes from both China and Vietnam will all sell. But they're targeting different markets.

 

[Viva_Viet]

They are actually upgrading the industrial structures. So 5G (worth noting they are focusing on IoT not phones), AI and robotics are what they are working towards. Of course lower value products will be moved to Vietnam or Bangladesh. But they will strive to retain higher value products in China.

I actually saw a demo when I visited China for once about one year ago. That was a highly automated dress design and making system with a workflow starting from body measuring by a consumer using a mobile phone straight to getting the dress made. The design, making and delivery processes go across a couple of different provinces, using 5G, IoT, AI and robotics, with and without human intervention at different stages.

As told the same process can also be applied to shoe making. So consumers get highly customised products with quick delivery.

Finally dresses and shoes from both China and Vietnam will all sell. But they're targeting different markets.

Actually its still cheaper when u only need to pay from 300-430 for shoes, Airpods assembly workers instead of using robots. In CN, shoes, Airpods assembly workers got abt 500-600 usd per month, not mentioning CN is suffering trade war and No FTA wt EU like VN, so they'd better use robots .

For CN 5G, they only can sell around CN now, EU-Aussie-North America-Brazil already blocked CN 5G, so the profit is very low. CN is stucking in middle income trap like Lybia when reaching $10,000 GDP per cpt.

 

[FairAndUnbiased]

Actually its still cheaper when u only need to pay from 300-430 for shoes, Airpods assembly workers instead of using robots. In CN, shoes, Airpods assembly workers got abt 500-600 usd per month, not mentioning CN is suffering trade war and No FTA wt EU like VN, so they'd better use robots .

For CN 5G, they only can sell around CN now, EU-Aussie-North America-Brazil already blocked CN 5G, so the profit is very low. CN is stucking in middle income trap like Lybia when reaching $10,000 GDP per cpt.

Vietnam is stuck in low income trap like Africa.

 

[Viva_Viet]

Vietnam is stuck in low income trap like Africa.

Thats good to save Jobs for millions shoes, Airpods assembly workers .

While VN engineers still earn from $ 2,200 to $5,000 per month from LG and Samsung R&D center, plus millions Vnese become millionaires thanks to higher lands price

 

[KAL-EL]

So Vietnam is making lots of AirPods now?

 

[Viva_Viet]

So Vietnam is making lots of AirPods now?

Yes. Not only Luxshare is assembling airpods but Pegatron, just moved to VN also make airpods .

Airpods assembly in CN is just for CN market, cant export due to 25% tariff.

----
Apple to produce millions of AirPods in Vietnam amid pandemic
US tech giant hastens shift away from China

Apple to produce millions of AirPods in Vietnam amid pandemic

US tech giant hastens shift away from China

asia.nikkei.com

 

[ozranger]

Actually its still cheaper when u only need to pay from 300-430 for shoes, Airpods assembly workers instead of using robots. In CN, shoes, Airpods assembly workers got abt 500-600 usd per month, not mentioning CN is suffering trade war and No FTA wt EU like VN, so they'd better use robots .

For CN 5G, they only can sell around CN now, EU-Aussie-North America-Brazil already blocked CN 5G, so the profit is very low. CN is stucking in middle income trap like Lybia when reaching $10,000 GDP per cpt.

As I said before, 5G is more useful with IoT than phones. China's is deploying 5G SA networks which can provide consistent throughput and latency even when data transfer volume is very big, which is crucial for building a robot-everywhere world. That's called the 4th industrial revolution.

In that way they are sort of making some products even more competitive than those made by intensive human labours.

 

[Viva_Viet]

As I said before, 5G is more useful with IoT than phones. China's is deploying 5G SA networks which can provide consistent throughput and latency even when data transfer volume is very big, which is crucial for building a robot-everywhere world. That's called the 4th industrial revolution.

In that way they are sort of making some products even more competitive than those made by intensive human labours.

So far, Robot factory for Adidas shoes is still not better than using workers wt 300-430 usd per month, Not mentioning that CN shoes suffer 25% tariff, so even use robots also cant help shoes factories in CN survive due to very high tariff.

----
BERLIN (Reuters) - Adidas ADSGn.DE plans to close high-tech "robot" factories in Germany and the United States it launched to bring production closer to customers, saying on Monday deploying some of the technology in Asia would be "more economic and flexible".

Adidas to close German, U.S. robot factories

Adidas <ADSGn.DE> plans to close high-tech "robot" factories in Germany and the United States it launched to bring production closer to customers, saying on Monday deploying some of the technology in Asia would be "more economic and flexible".

www.reuters.com

 

[hualushui]