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FirstFT: fears over Chinese property developer scare investors


Global Updates

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The S&P 500 had its worst day since May yesterday as a liquidity crisis at one of China’s largest real estate developers scared investors.

Shares of Evergrande, the world’s most leveraged real estate developer, closed down 10% in Hong Kong to their lowest level since May 2010. Sell-triggered share price falls in Asia, in Europe and the United States and raised questions about the health of the Chinese real estate industry and the economy in general.

The liquidation hit the entire market, with just 50 stocks of the benchmark S&P 500 ending the day in the green. The index fell 2.9% at the start of the session before recovering some of the losses in the afternoon to close 1.7% lower at 4,357.73.

Sales eased today in Asia and Europe, but Evergrande shares fell another 7% in Hong Kong as investors braced for a possible default.

Evergrande has over $ 300 billion in obligations to creditors and other businesses and 778 projects underway in 223 cities. A deadline for paying interest on its offshore bonds is looming on Thursday.

Meanwhile, the FT reports today that executives at the struggling Chinese real estate developer have admitted that the billions of dollars raised by selling wealth management products to retail investors have been used to fill funding gaps and even to reimburse other wealth management investors.

  • James Kynge: Beijing is engaged in a very delicate exercise, writes our global editor China. He must inflict enough pain to show he is serious about curbing reckless lending in the overheated real estate market, but not to the point of making it one of the most important engines of dying economic growth.

Five other articles in the news

1. Trudeau is re-elected but fails to get the majority Canadian broadcast networks predict Justin Trudeau will win a third term as prime minister, but his Liberal party has failed to secure enough seats to form a majority in Parliament. The Liberals are on course to win 156 seats, up from 155 after the last election in 2019. The Conservatives, led by Erin O’Toole, are expected to win 122 seats, up from 119.

Officials count special ballots during the federal election at Elections Canada's distribution center in Ottawa, Ontario

Officials count special ballots during the federal election at Elections Canada’s distribution center in Ottawa, Ontario © Bloomberg

2. Universal Music shares a boom for its Amsterdam debut Shares of the world’s largest music label jumped 40% on their first day of listing on Amsterdam’s Euronext stock exchange, valuing the company at € 45.4 billion. Universal Managing Director Lucian Grainge is on the line for a big win.

3. Shell accepts $ 9.5 billion Permian Basin sale Royal Dutch Shell has agreed to sell its operations in the Permian Basin, the largest oil field in the United States, to rival ConocoPhillips for $ 9.5 billion in cash. The Anglo-Dutch oil supermajor is under intense pressure to accelerate the move away from fossil fuels after a Dutch court ordered the company to reduce its net carbon pollution by 45% from 2019 levels by 2030.

4. Coinbase abandons the loan product Coinbase has scrapped plans to launch a new digital asset lending product, giving in to pressure from U.S. securities regulators who warned it was an unregistered security that prompted them to take action in justice.

5. Europe weighs its aid plan to cope with soaring gas prices Soaring gas and electricity costs are forcing European governments to discuss billions of euros in aid to stricken households and suppliers, as concern mounts over a worsening winter energy crisis.

Yesterday, we incorrectly referred to the Société Radio-Canada when it should have been the Société Radio-Canada.

Coronavirus digest

Was Joe Biden right to ease travel restrictions for fully vaccinated foreign passengers? Share your point of view in our last poll.

An image from the FT survey on vaccination trips to the United States

The day to come

United Nations General Assembly Joe Biden will address the United Nations General Assembly for the first time today as he seeks to open a new “chapter of intensive diplomacy” aimed at countering the rise of China. Later, the US President will welcome British Prime Minister Boris Johnson to the White House.

Federal Open Market Committee meets The two-day meeting is expected to shed light on the fate of the massive bond buying program that the US central bank put in place last year to stabilize financial markets and support the economy after the start of the global pandemic.

Summary of earnings With the coronavirus still disrupting business, Adobe is expected to continue to show strong revenue growth in third quarter results. FedEx, the beneficiary of the e-commerce surge caused by the pandemic, is expected to release first quarter figures.

What else do we read

Why Aukus is welcome in the Indo-Pacific The Aukus Military Pact strengthens existing ties and creates a network of powers determined to prevent the region from falling under Beijing rule. Containing China is now the top strategic priority for the United States, writes Gideon Rachman.

The DNA bet of the scientists of the garage The increasing accessibility of gene editing tools has led to an explosion of uncontrolled experiments in biological self-improvement in recent years. Once an eccentric subculture, the rogue mentalities of the scientists in the garage are starting to generate consternation among specialists and international organizations.

The hidden cost of powerful buyers and cheap prices Supply chain resilience has come at a cost. A relentless system, where suppliers and workers are stretched to the limit by powerful buyers, can be effective most of the time. But, as we just found out, when there is a shock, such a system can quickly collapse, writes Sarah O’Connor.

Phones, cars and the future The car has proven to be stubbornly slow to change in over a century. Likewise, conventional thinking around smartphones is that innovation has stalled. Yet the more Tim Bradshaw thinks about their evolution, the more he sees parallels that point the way forward.

Investment masterclass with the naked trader In the latest episode of the Money Clinic podcast, Robbie Burns, better known as the Naked Trader, shares his top tips for getting started in stock trading. Forget about being a day trader, he says, you have to let the money flow in slowly and take a serious, business approach if you are to be successful.

Art

At the Jeff Koons exhibition, Sparkle, at Palazzo Strozzi in Florence, art is not in any of the objects. It’s in the viewer, writes Koons in How to spend it:

“It’s that sense of the essence of their own potential as a human being. It’s what’s valuable and the only thing that’s relevant. And so, automatically, art becomes this dialogue with the community, ”said Koons.

A montage featuring the face of Jeff Koons

Jeff Koons: “It’s this aspect of the movement that fascinates me: celebrating being alive and being human” © Celina Pereira

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