{"id":353386,"date":"2021-10-15T21:26:00","date_gmt":"2021-10-15T18:26:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/market-extra-chinas-financial-system-near-peak-stress-but-spillovers-yet-to-come-analysts\/"},"modified":"2021-10-15T21:26:00","modified_gmt":"2021-10-15T18:26:00","slug":"market-extra-chinas-financial-system-near-peak-stress-but-spillovers-yet-to-come-analysts","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/market-extra-chinas-financial-system-near-peak-stress-but-spillovers-yet-to-come-analysts\/","title":{"rendered":"#Market Extra: China\u2019s financial system near \u2018peak stress,\u2019 but spillovers yet to come: analysts"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a23bd33eb4c0\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a23bd33eb4c0\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/market-extra-chinas-financial-system-near-peak-stress-but-spillovers-yet-to-come-analysts\/#William_Watts\" >William Watts<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#Market Extra: China\u2019s financial system near \u2018peak stress,\u2019 but spillovers yet to come: analysts<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\">\n<\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\" role=\"region\" aria-label=\"article body\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\" data-nosnippet>\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000446363\" role=\"document\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetArticleReader\n              \n              inline\n  article__inset\n          article__inset--type-InsetArticleReader\n              article__inset--inline\n  \"><\/p>\n<div class=\"media-object-article-reader\">\n<div class=\"audioplayer\" data-sbid=\"WP-MKTW-0000446363\" role=\"region\" aria-label=\"Listen to Article\" tabindex=\"-1\" id=\"articlereader\" data-show-title=\"false\" data-theme=\"wsj-article-reader\" data-show-header=\"false\" data-show-subscribe=\"false\" data-ads-enabled=\"true\" data-save-publication=\"false\">\n        <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       China\u2019s financial markets are nearing \u201cpeak stress\u201d levels, with worries mounting over its highly leveraged property sector as the saga around troubled developer China Evergrande Group plays out.  <\/p>\n<p> And investors shouldn\u2019t expect a sustained bounce in the country\u2019s equity market until the credit cycle turns for the better, said analysts at Danske Bank.<\/p>\n<div class=\"paywall\">\n       But assets indirectly linked to the world\u2019s second-largest economy have yet to feel the spillover effects of China\u2019s economic slowdown, they also warned, in a Friday note.<\/p>\n<p>\u201cWhile Chinese equity markets have been more stable lately, the stress in credit markets for developers have continued unabated with rates on high yield credit reaching new highs by the day,\u201d wrote Copenhagen-based Allan von Mehren and Lars Sparres\u00f8 Merklin (see chart below).<\/p>\n<div data-layout=\"inline\n                \" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetMediaIllustration\n            inline\n  article__inset\n          article__inset--type-InsetMediaIllustration\n            article__inset--inline\n  \"><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        img-inline\n        article__inset__image\n      \" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<div style=\"padding-bottom:96.28571428571429%;\" data-subtype=\"photo\" class=\"image-container  responsive-media article__inset__image__image\">\n        <img decoding=\"async\" srcset=\"https:\/\/images.mktw.net\/im-417956?width=540&amp;size=1.038118410381184 540w, https:\/\/images.mktw.net\/im-417956?width=620&amp;size=1.038118410381184 620w, https:\/\/images.mktw.net\/im-417956?width=639&amp;size=1.038118410381184 639w, https:\/\/images.mktw.net\/im-417956?width=700&amp;size=1.038118410381184 700w, https:\/\/images.mktw.net\/im-417956?width=700&amp;size=1.038118410381184&amp;pixel_ratio=1.5 1050w, https:\/\/images.mktw.net\/im-417956?width=700&amp;size=1.038118410381184&amp;pixel_ratio=2 1400w, https:\/\/images.mktw.net\/im-417956?width=700&amp;size=1.038118410381184&amp;pixel_ratio=3 2100w\" sizes=\"(max-width: 639px) 100vw, (max-width: 979px) 620px, (max-width: 1299px) 540px, 700px\" src=\"https:\/\/images.mktw.net\/im-417956?width=700&amp;height=674\" alt=\"\" title=\"\"><\/div><figcaption class=\"wsj-article-caption article__inset__image__caption\" itemprop=\"caption\"><span class=\"wsj-article-credit article__inset__image__caption__credit\" itemprop=\"creator\"><br \/>\n            Danske Bank<br \/>\n          <\/span><br \/>\n  <\/figcaption><\/figure>\n<\/div>\n<p>       Evergrande<br \/>\n        708,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/203724294\/delayed\" class=\"positive\">+4.63%<\/bg-quote><span>,<\/span><br \/>\n       the highly leveraged developer with more than $300 billion in debt, has been in the spotlight, reportedly missing several coupon payments in recent weeks and in danger of being declared in default as grace periods for those payments run out. Evergrande\u2019s chief executive, Xia Haijun, was holding talks in Hong Kong with creditors and investors over a restructuring and potential asset sales, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.reuters.com\/article\/china-evergrande-debt-ceo-hongkong\/exclusive-evergrande-ceo-in-hong-kong-for-restructuring-asset-sale-talks-sources-say-idUSL4N2RB1SD\" class=\"icon none\">Reuters reported Friday<\/a>, citing two persons familiar with the matter.<\/p>\n<p> <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.wsj.com\/articles\/chinese-property-bonds-hammered-by-weak-september-sales-and-a-surprise-default-11633523451?mod=article_inline&amp;mod=article_inline\" class=\"icon none\">A selloff<\/a> last week for dollar-denominated bonds of Chinese developers was triggered after luxury developer Fantasia Holdings Group Co. failed unexpectedly to repay $206 million in dollar bonds that matured on Oct. 4.<\/p>\n<p>Amid fears of a spillover, China\u2019s central bank on Friday piped up to say that threats to the financial system from the property sector, which are estimated to account for nearly 30% of the country\u2019s gross domestic product once upstream and downstream links are taken into account, were controllable, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.wsj.com\/articles\/china-evergrande-spillover-risks-can-be-controlled-central-bank-says-11634301754?page=1&amp;mod=article_inline\" class=\"icon none\">The Wall Street Journal reported<\/a>, citing state <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a> outlets.<\/p>\n<p>Zou Lan, head of financial markets at the People\u2019s Bank of China, said officials were urging Evergrande to speed up asset disposals and resume projects to protect the interests of home buyers, the report said. The official said financial authorities, the housing ministry and local governments would work together to provide funding support so stalled projects could restart.<\/p>\n<p>The Shanghai Composite<br \/>\n        SHCOMP,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210598127\/delayed\" class=\"positive\">+0.40%<\/bg-quote><br \/>\n       fell 0.6% this week, while the broader CSI 300<br \/>\n        000300,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210598128\/delayed\" class=\"positive\">+0.38%<\/bg-quote><br \/>\n       eked out a minor gain. The Shanghai Composite is up 2.9% for the year to date, but down more than 4% from its 2021 peak set in February. The CSI 300 is down 5.4% for the year and has tumbled nearly 17% from its 2021 high.<\/p>\n<p>The large-cap U.S. benchmark S&amp;P 500<br \/>\n        SPX,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210599714\/realtime\" class=\"positive\">+0.78%<\/bg-quote><br \/>\n       is up more than 19% so far this year, while the blue-chip Dow Jones Industrial Average<br \/>\n        DJIA,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210598065\/realtime\" class=\"positive\">+1.09%<\/bg-quote><br \/>\n       has gained more than 15%.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>The Danske analysts noted that big state banks were told to ease restrictions on mortgage lending and were allowed to securitize loans again, in an effort to underpin home sales.<\/p>\n<p>They said Beijing will likely take steps soon to \u201cunfreeze\u201d credit markets, \u201cas very few developers can survive this kind of funding and liquidity squeeze for long.\u201d<\/p>\n<p>Among the options, the PBOC could cut the reserve requirement ratio and direct big state banks to start buying high-yield bonds, they said. The analysts argued that if conditions calm, purchasing bonds at 20% would likely turn out to be a \u201cquite favorable\u201d investment for the banks, while private investors would also be encouraged to begin buying if the government gets involved.<\/p>\n<p>They also see more direct bank lending to developers, with authorities likely to loosen regulations that crimped loans last year.<\/p>\n<p>However, the Danske analysts and other China watchers have argued that Evergrande and the property sector were unlikely to threaten a \u201cLehman moment,\u201d a reference to the 2008 collapse of Lehman Brothers that temporarily froze global credit markets and marked the bleakest phase of the global financial crisis. That\u2019s because the government\u2019s ability to dictate the actions of lenders and others give Beijing more flexibility.<\/p>\n<p>But the crackdown on excesses in the property sector and other factors were still likely to ensure a continued slowdown in China\u2019s economy.<\/p>\n<p>\u201cEven following an orderly restructuring of the worst-affected developers with minimal contagion to the financial system, construction activity would still almost inevitably slow much further. As we have warned for some time, that\u2019s the logical consequence of the \u2018three red lines\u2019 policy imposed on developers last year, plus the enormous demographic headwinds that the sector faces,\u201d said Oliver Jones, senior markets economist at Capital Economics, in an Oct. 12 note.<\/p>\n<p>The Danske analysts emphasized that there\u2019s a long way to go from peak financial stress to restarting the credit cycle.<\/p>\n<p>\u201cFor Chinese equities, this may simply be a period of time where we see more sideways moves, awaiting the next large cyclical reboot of credit,\u201d they wrote. \u201cFor assets which are more indirectly linked to Chinese assets and the credit cycle, we suspect this will mean little.\u201d<\/p>\n<p>For example, the euro<br \/>\n        EURUSD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210561242\/realtime\/sampled\" class=\"negative\">-0.03%<\/bg-quote><br \/>\n       is likely to continue falling versus the dollar \u201cas the effects of historical Chinese tightening moves through the global manufacturing<br \/>chains.\u201d <\/p>\n<\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>    <span>By<\/span><\/p>\n<div class=\"author mobile-scrim hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"William Watts\",\"subhead\":\"The Wall Street Journal\",\"list\":[{\"type\":\"link\",\"icon\":\"bio\",\"url\":\"https:\/\/www.marketwatch.com\/topics\/journalists\/william-watts\",\"text\":\"Biography\"},{\"type\":\"link\",\"icon\":\"twitter\",\"url\":\"https:\/\/twitter.com\/wlwatts\",\"text\":\"@wlwatts\"},{\"type\":\"link\",\"icon\":\"facebook\",\"url\":\"https:\/\/facebook.com\/williamwattsmarkets\",\"text\":\"williamwattsmarkets\"},{\"type\":\"link\",\"icon\":\"email\",\"url\":\"http:\/\/www.marketwatch.com\/news\/mailto:bwatts@marketwatch.com\",\"text\":\"bwatts@marketwatch.com\"}]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\" aria-label=\"links to  author page\"><span class=\"ez-toc-section\" id=\"William_Watts\"><\/span>William Watts<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-76CF-9BC1DFD264ED%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;#Market Extra: China\u2019s financial system near \u2018peak stress,\u2019 but spillovers yet to come: analysts&#8221; China\u2019s financial markets are nearing \u201cpeak stress\u201d levels, with worries mounting over its highly leveraged property sector as the saga around troubled developer China Evergrande Group plays out. And investors shouldn\u2019t expect a sustained bounce in the country\u2019s equity market until&#8230;<\/p>\n","protected":false},"author":1,"featured_media":353387,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-353386","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/353386","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=353386"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/353386\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/353387"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=353386"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=353386"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=353386"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}