What’s New in Evergrande Real Estate Group
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According to short-selling Jim Chanos, the Evergrande crisis could be “much worse” for Chinese investors than the “Lehman-style situation.”
“There are a lot of Evergrandes in China — Evergrande happens to be one of the biggest.” Chanos I told the in an interview. “But all developers look like this. The entire Chinese real estate market is skyrocketing,” he said. Founder of Kinikos Associates, best known for predicting the collapse of Newyork-based hedge fund Enron.
World concerns Most helpful developers If Evergrande fails to meet its debt repayment with one of the international bonds due on Thursday, investors are worried about potential fallout, causing a decline in the global market this week. Some say that such defaults could spread to the wider Asian corporate bond market as a whole.
The real estate company said the domestic payments to be paid on Thursday were “already settled” but did not provide any indication of whether it would pay offshore investors, including some major international asset managers. rice field.
Investors widely agree that the elucidation of Evergrande will not hurt banks and investors around the world Lehman Brothers bankruptcy Its international debt burden is relatively small, about $ 20 billion, so it did so during the financial crisis.
However, its total debt exceeds $ 300 billion, primarily for creditors and businesses in mainland China.
Chanos is one of those who warn that the economic impact of a wider set of nonpayments could be serious.
“In many respects you don’t have to worry about it being a Lehmanian situation, but in many other respects it’s much more because it’s a sign of the entire economic model and the debt behind it. It’s bad, “said 63 years old.
Last year, President Xi Jinping took steps to address a long-standing chronic oversupply of real estate in China, and Beijing limits the leverage of sectors that directly and indirectly contribute 29% of GDP. Drafted a new rule.
“Trying to close this bubble comes with risks,” says Chanos. “I don’t think they are a transmission risk. This is not a Lehman type situation with transmission [within and between banks] And everyone stops lending to others. This poses a higher risk to the economic model, as residential real estate still accounts for a very large part of GDP. ”
Mr Chanos said the country needs to “find new growth drivers or shift down to lower levels of growth semi-permanently.”
“Has the Chinese Communist Party tackled that impact? I don’t know yet,” he added.
Under-selling funds like Kinikos have lost support in the long-term boom in the market since the financial crisis caused by the temporary pandemic of the Covid-19 pandemic in 2020. The assets managed by Kinikos were $ 7 billion more than 10 years ago.
China forms a growing part of Chanos’ strategy. Kinicos has more than doubled its global short fund exposure to China in the past year, including adding smaller short positions to HSBC and Standard Chartered Bank “for large lending exposure to Greater China” Increased to. Both banks are listed on London, but most of their profits come from Asia. HSBC and Stan Chart declined to comment.
Last year, Shanos bet on Luckin Coffee, which was once touted as China’s answer to Starbucks, after rival short-selling Muddy Waters Carson Brock advised him to see it. The company was then investigated for accounting fraud, and Chanos closed its short position with profits after a sharp drop in stock prices.
Chanos also said he is also Wynn Resorts, a short casino group that derives much of its cash flow from Macau, the world’s largest gambling hub. “I think the crackdown on Macau has just begun,” he said. last week, Casino stock suffered The worst day in history when authorities announced a review of game law.
Additional report by Thomas Hale in Hong Kong
Evergrande fallout can be worse than Chinese Lehman, Jim Chanos warns
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