Digital Finance Analytics (DFA) Blog
"Intelligent Insight"
Another Friday chat with journalist Tarric Brooker, and slides as we look at China and the impact on the Australian economy.
Slides are available here: https://avidcom.substack.com/p/dfa-chart-pack-your-australia-and
Send us your questions for future shows!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Another Friday chat with journalist Tarric Brooker, and slides as we look at China and the impact on the Australian economy.
Slides are available here: https://avidcom.substack.com/p/dfa-chart-pack-your-australia-and
Send us your questions for future shows!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Wall Street’s main stock indexes closed sharply lower on Tuesday after stronger-than-expected retail sales data stoked worries interest rates could stay higher for longer, while U.S. big banks dropped on a report that Fitch could downgrade some lenders.
The U.S. retail sales data comes on the heels of strong inflation readings for July, and could potentially give the Fed more impetus to remain hawkish in the coming months. Such a scenario bodes poorly for risk-driven assets, particularly tech stocks.
The Commerce Department report showed retail sales grew 0.7% last month against expectations of a 0.4% rise, suggesting the U.S. economy remains strong.
After the data, traders’ bets of a pause on hikes by the Federal Reserve next month stayed intact at 89%, yet analysts said investors were worried rates could stay at current levels longer than anticipated.
Banks saw the brunt of the selling as investors grew more anxious about interest rates. The U.S. Treasury yield curve has been inverted for over a year, with longer-term bonds yielding less than short-term debt instruments. This persistent situation pressures profits that banks can earn on loans.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Wall Street’s main stock indexes closed sharply lower on Tuesday after stronger-than-expected retail sales data stoked worries interest rates could stay higher for longer, while U.S. big banks dropped on a report that Fitch could downgrade some lenders.
The U.S. retail sales data comes on the heels of strong inflation readings for July, and could potentially give the Fed more impetus to remain hawkish in the coming months. Such a scenario bodes poorly for risk-driven assets, particularly tech stocks.
The Commerce Department report showed retail sales grew 0.7% last month against expectations of a 0.4% rise, suggesting the U.S. economy remains strong.
After the data, traders’ bets of a pause on hikes by the Federal Reserve next month stayed intact at 89%, yet analysts said investors were worried rates could stay at current levels longer than anticipated.
Banks saw the brunt of the selling as investors grew more anxious about interest rates. The U.S. Treasury yield curve has been inverted for over a year, with longer-term bonds yielding less than short-term debt instruments. This persistent situation pressures profits that banks can earn on loans.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
China looks like it will reduce the reserve requirement ratio (RRR), or the amount of cash that banks must hold in reserve, to shore up its slowing economy amid growing headwinds.
This is an attempt to stimulate the economy (reverse to Federal Reserve and other Western economies) by encouraging banks to lend harder to the property sector and in response to the COVID lock downs.
Question is of course is, will it work – or just slim the reserves of the banks some more….
Go to the Walk The World Universe at https://walktheworld.com.au/
It started as an act of protest by fed-up apartment buyers in a single project in a city in central China. Now tens of thousands of people around the country are withholding payments on their mortgages for homes that developers, including China Evergrande Group, have yet to finish.
The movement has since spread to at least 301 projects in about 91 cities according to figures from a crowdsourced document titled “WeNeedHome.”
Tracking the extent of the protest has grown increasingly difficult after China began censoring in mid-July crowdsourced online documents tallying the number of boycotts. Such shared files have been a key source of data for global investors and researchers.
Real estate accounts for about 78% of household wealth in China—double the US rate—and families typically save for years and borrow from friends and family to purchase a home. As the Evergrande debacle unfolded last year, many market watchers said that the financial contagion would be limited by the fact that homebuyers in China often pay in cash. But some did use mortgages, and the boycott underscores how much of the pain of the crisis has fallen on households. China’s outstanding mortgages stood at 38.3 trillion yuan at the end of 2021, according to the People’s Bank of China. GF Securities Co. expects that up to 2 trillion yuan ($296 billion) of mortgages could be impacted by the collective refusals. That’s the total balance of the loans; the amount that could be withheld will be smaller.Should every buyer default, that would lead to a 388 billion-yuan increase in nonperforming loans, Jefferies’s said.
Banks say the impact is much lower still. Lenders have detailed about 2.11 billion yuan of loans at risk from the protests, according toa tally of banks that have disclosed their exposure.
The wildcat boycott on loans worth as much as 2 trillion yuan ($296 billion) threatens to deepen China’s real estate slump by shifting focus from the country’s embattled property companies to its massive banks. Lenders have relied on mortgages as their safest source of revenue as Covid lockdowns stifle growth.
Go to the Walk The World Universe at https://walktheworld.com.au/
It started as an act of protest by fed-up apartment buyers in a single project in a city in central China.
Now tens of thousands of people around the country are withholding payments on their mortgages for homes that developers, including China Evergrande Group, have yet to finish.The movement has since spread to at least 301 projects in about 91 cities according to figures from a crowdsourced document titled “WeNeedHome.”
Tracking the extent of the protest has grown increasingly difficult after China began censoring in mid-July crowdsourced online documents tallying the number of boycotts. Such shared files have been a key source of data for global investors and researchers.
Real estate accounts for about 78% of household wealth in China—double the US rate—and families typically save for years and borrow from friends and family to purchase a home. As the Evergrande debacle unfolded last year, many market watchers said that the financial contagion would be limited by the fact that homebuyers in China often pay in cash.
But some did use mortgages, and the boycott underscores how much of the pain of the crisis has fallen on households. China’s outstanding mortgages stood at 38.3 trillion yuan at the end of 2021, according to the People’s Bank of China. GF Securities Co. expects that up to 2 trillion yuan ($296 billion) of mortgages could be impacted by the collective refusals. That’s the total balance of the loans; the amount that could be withheld will be smaller.
Should every buyer default, that would lead to a 388 billion-yuan increase in nonperforming loans, Jefferies’s said. Banks say the impact is much lower still. Lenders have detailed about 2.11 billion yuan of loans at risk from the protests, according toa tally of banks that have disclosed their exposure.
The wildcat boycott on loans worth as much as 2 trillion yuan ($296 billion) threatens to deepen China’s real estate slump by shifting focus from the country’s embattled property companies to its massive banks. Lenders have relied on mortgages as their safest source of revenue as Covid lockdowns stifle growth.
Go to the Walk The World Universe at https://walktheworld.com.au/
We look at how the changes in China’s economy might impact Australia.
Although Q1 GDP data was better than expected, some analysts are predicting that Q2 may be less forgiving. One clue is the rising unemployment rate in 31 major cities in China.
A key question is how much China’s government can offset decelerating growth with fiscal and monetary support? Another critical variable is whether the government continues to pursue a zero-Covid policy, which contrasts with much of the rest of the world, which is increasingly learning to live with the virus. By some accounts, the longer China tries to stave off widespread infection, the bigger the eventual blowback when the policy is abandoned, as some analysts predict.
The pandemic has to be the biggest source of risk for China’s growth this year. And this has significant consequences for Australia.
Go to the Walk The World Universe at https://walktheworld.com.au/
We look at how the changes in China’s economy might impact Australia.
Although Q1 GDP data was better than expected, some analysts are predicting that Q2 may be less forgiving. One clue is the rising unemployment rate in 31 major cities in China.
A key question is how much China’s government can offset decelerating growth with fiscal and monetary support? Another critical variable is whether the government continues to pursue a zero-Covid policy, which contrasts with much of the rest of the world, which is increasingly learning to live with the virus. By some accounts, the longer China tries to stave off widespread infection, the bigger the eventual blowback when the policy is abandoned, as some analysts predict.
The pandemic has to be the biggest source of risk for China’s growth this year. And this has significant consequences for Australia.
Go to the Walk The World Universe at https://walktheworld.com.au/
China Evergrande Group’s property sales plummeted in 2021 for the first time in at least a decade, as the giant developer slipped into default and buyer confidence faded. Evergrande, China’s second-biggest developer by sales in 2020, is the largest Chinese real estate developer by issuance of offshore, U.S. dollar-denominated debt, which stood at $19 billion last year.
A filing Tuesday showed the company’s contracted sales of properties totaled 443.02 billion yuan ($69.22 billion) last year, down 38.7% from the 723.25 billion yuan in contracted sales reported for 2020. It met about 60% of a 750 billion yuan target set at the start of the year.
More broadly, Chinese shares had their worst start to the new year since 2019, as investors took profit on some of their most successful bets in 2021.
Chinese stocks, hobbled by regulatory pressures and uneven economic growth, plummeted in 2021. The FXI China large-cap ETF fell 21% in its worst year since 2008. So the question is where to from here? Many investors are still seeing long term opportunity, as China is going to continue to be a big part of the global infrastructure. So the question is will investors be prepared to wait out the near-term turbulence. Will they stick with China?
Go to the Walk The World Universe at https://walktheworld.com.au/
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