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China Bond Default Risk Reignites, Despite "Never Anticipating Any Risks"
When, six months ago, we first brought the market's attention to Chaori Solar - China's first corporate bond default in history - there were 2 narrative sin play: 1) it's all good, government knows the contagion risk and will bail them out (that happened), or 2) if government bails them out, it will merely delay the inevitable and stoke further risk exposure (that happened too). However, as Bloomberg reports, the consequences are coming as bondholders met today to discuss the value of any assets left (Chaori’s liabilities were more than 700 million yuan greater than its assets). With China's TSF collapsing last month, perhaps demand is finally waining for these high-risk assets, but expectations of implied government support remain, as one Chaori 'loser' laments, "never anticipated any risks with the securities."
Halted since April...
Holders of China’s first corporate bond to default onshore met today in Shanghai, as investors look for clues on how the government will balance market liberalization with steps to maintain stability.
There was difficulty assessing the overseas assets of Shanghai Chaori Solar Energy Science & Technology Co...
More than 10 police cars were on the street in front of the company headquarters today around 2:30 p.m. as the gathering took place.
While Premier Li Keqiang said defaults may be unavoidable in some cases after Chaori failed to make a full coupon payment on March 7, the country has averted similar cases since. Widespread bond nonpayments would cause financial market turbulence, which can’t be allowed when the economy faces “relatively heavy” downward pressure, according to a front-page commentary in a central bank publication today.
Chaori only paid 4 million yuan ($650,755) of an 89.8 million yuan coupon due in March on its 2017 bonds, becoming the first company to default on a yuan note onshore. Shanghai marked a milestone in corporate bankruptcy in June when a court accepted a restructuring application for the manufacturer.
As of March, Chaori’s liabilities were more than 700 million yuan greater than its assets, according to the statement.
No risk...
Ding Guixiang, who said she invested more than one million yuan in the Chaori bonds, said outside the meeting today that she had never anticipated any risks with the securities when she bought them.
Government to the rescue...except for Chaori...
“To prevent large-scale bond defaults, regulators will strengthen monitoring and supervision to solve crises in a timely manner,” according to the commentary today in the Financial News, a publication of the People’s Bank of China. The commentary was by Xu Shaofeng, who wasn’t identified.
* * *
As JPMorgan warned in a previous note,
"avoiding defaults is not the right answer, as it will only delay or even amplify the problem in the future."
A default that encourages lenders to price in risk would be a positive development.
* * *
We noted before that a more confident government means more defaults...
With amazing speed in consolidating power in 2013, a more confident President Xi Jinping and team are expected to push for a wide range of reforms. 2014 will be the year for China seriously cleans up mounting local government and corporate debts which have been rapidly accumulated since late 2008. We believe the chance of some bond and trust loan defaults will rise significantly in 2014, especially as the more confident government sees the need for some defaults to develop a more disciplined financial market.
* * *
Clearly then - the government is not confident.
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"there were 2 narrative sin play"
How does this happen ???
Should read:
"there were 2 narratives in play"
Who is screwing with the text processors ?
These are not common typographical errors.
PLEASE, someone else notice text is being hacked up.
TWYLER !!!
"WTF !? "
Hory Chit!!!
FOOK ME!!
Where is Leo Kovalkis? He loved Chinese Solars. I bet it's paying off now....
"never anticipated any risks with the securities."
...as far as the central star shines.
Oops.
How does it feel to post these fundamental articles day after day while the artificial stock market pops to new highs each and every time?
Idiots want to know...
steady as the artificial pops go towards reset.
But, but, but, their version of Bernank the Finance Minister Wi Fook Yu said it was conatines!??!?!?
On a side note, dear ZH citizens...
Guess who QUIT THEIR FUCKING JOB TODAY !!!
After 5 years of pushing the buttons and wiggling the mouse
I QUIT I QUIT I QUIT
I AM FREEEEEEEE!!!!
Winter garden is going to look soooooo good this year.
And yes, I know how to make a wicked brew of Ebola killin' Nano Silver.
Here's to coming out the other side as an old gray man !!!!
I'm FREEE !!!!
Ah, but you'll love this.
As soon as Nigerian Medical Authorities mentioned the cure
to Ebola is Nano Silver (aka: Nano Silva) the FDA fired back
proclaiming Nano Silver is a...pesticide.
DO WHAT !!!!!...???
http://allafrica.com/stories/201408180748.html
"The FDA's warning comes on the heels of comments by Nigeria's top health official, Onyebuchi Chukwu, who reportedly said earlier Thursday that eight Ebola patients in Lagos will receive an experimental treatment called nano-silver."
Or bluish-gray!
Kudos, and good luck, because we're all counting on you.
No, it reads just fine.
Everythings fine, look at the squirrels over there >
"Holders of China’s first corporate bond to default onshore met today in Shanghai, as investors look for clues on how the government will balance market liberalization with steps to maintain stability."
There's your free shit army. Give these bondholders an EBT card and a Colt 45 and directions to the nearest Walmart.
Some of these quotes are real gems :)
"never anticipated any risks with securities."
reminds me of this one
"I've been investing since January and I've never seen something like this" - HK housewife on the stockmarket
"Ding Guixiang, who said she invested more than one million yuan in the Chaori bonds, said outside the meeting today that she had never anticipated any risks with the securities when she bought them."
This is the mess we fucking find ourselves in. People "investing" capital without knowing there is risk involved with investing. For Pete's sake, this is the problem with the nanny state trying to fix everything. Sometimes you just have to let people fail, and hopefully learn a lesson or two.
"Sometimes you just have to let people fail..."
This is the one context in which CEOs will readily acknowledge that corporations are not "people." Come to think of it, the same CEOs agree that neither they nor their corporations are "folks" where torture is concerned.
The welfare state is the outcome (or perfect cover for PTB) of this "Sometimes you just have to let people fail..." so we can lend a hand.
There's no black/white, success/fail, yang/yin...
there's only darkness (99.9%) and a twinke of light for us to grasp and thrive on !!!
Time to drop the fucking dip and start afresh. Start with live from your heart.
Dr E.
Can you please address the African Claims about Ebola and Nano Silver.
Many thanks!
YES I QUIT MY JOB....
and sorry for major OFF TOPIC chatter...
but...
I QUIT MY JOB .... FREEEEEEEEEEEEEEEEEEEEEEe
FREEEEEEEEEee
FREEEE
FRREEEEEEEEEEEEE??
Yeah, right.......for how long?
The debate continues as to how stable china really is. Much of the recent growth in China after 2008 came from a massive 6.6 trillion dollar stimulus program that expanded credit and poured massive amounts of money into the system. This money encouraged expansion and construction with little regard as to real demand or need.
Now China finds itself in a credit trap. For years the people of China have had the habit of saving much of what they earn but the low interest rates paid at banks has not rewarded savers. With few investment options much of this money has drifted towards housing and driven housing prices sky high. The economic efficiency of credit is beginning to collapse in China and the unwinding of China’s giant credit spree could be very painful. More in the article below.
http://brucewilds.blogspot.com/2014/03/china-and-great-credit-trap.html
build more chinese restaurants
All around the mulberry bush the monkey chased the weasel.
Yaaaah more youtube documentaries.
Wal-Mart's future is the Chinese middle class.
hahahahaha..........
But Round rye, we are rated quadriple ray!
As JPMorgan warned in a previous note,
Something about a kettle, a pot, and a color comes to mind.....