Sunday, March 29, 2020 7:39:10 PM
Things as setting up for an ugly week for Crude Oil and that could be one of the drivers in the FX Markets to start another Dollar Rally. WTI Crude is going to break $20 on it's way to test $18 and the Dollar looks like its heading to new highs and that's NOT Good for the FED or EM Debt. It's also going to make it difficult for GOLD. Spot Gold has to hold above $1,600 but I think the HELL STORM coming in the Chinese Economy may force some Selling because you can be guaranteed Chine will not be Buying GOLD in April.
China is heading for a Crushing cycle of Repricing in Real Estate and a HUGE loss in their Global Export markets. The Combinations of Real Estate and Manufacturing/Export markets correcting together will drive Unemployment in China above 10% and this ""Come to Jesus"" moment for XI and His fellow Communists is going to CRUSH both the Shadow and National Banking System. The Credit Defaults have already begun.
China’s property sector is at the epicentre of the crisis
China’s property sector is at the epicentre of the crisis
by Paul Hodges
Second-order impacts are starting to appear as a result of China’s lockdowns. These are having a big impact on the critical property sector, which makes up as much as 25 per cent of gross domestic product.
Housing sales fell almost 40 per cent in February and seem likely to be down again in March, while developer Evergrande cut prices to try and maintain its cash flow. This creates growing risk in the offshore dollar market, where property developers have been significant borrowers, with Fitch already warning of possible defaults. It is unclear whether local authorities can provide much support, as their dependence on revenue from land sales means their own position is weakening.
cont...............
A Global Consumer Default Wave Is Just Getting Started in China
A Global Consumer Default Wave Is Just Getting Started in China
Bloomberg News
(Bloomberg) -- Like millions of people around the world, Zhang Chunzi borrowed money she thought she’d be able to repay before the coronavirus changed everything.
Now laid off from her job at an apparel exporter in Hangzhou -- one of China’s most prosperous cities -- the 23-year-old is missing payments on 12,000 yuan ($1,700) of debt from her credit card and an online lending platform operated by Jack Ma’s Ant Financial. “I’m late on all the bills and there’s no way I can pay my debt in full,” Zhang said.
Her story is playing out in similar ways across China, where the virus outbreak has been taking lives and ravaging the economy for more than three months. As Covid-19 works its way through the rest of Asia, Europe and the Americas -- forcing countries into lockdown, driving up unemployment and pummeling small-business owners -- analysts say it’s only a matter of time before stretched households globally start to default on their loans.
The early indicators from China aren’t pretty. Overdue credit-card debt swelled last month by about 50% from a year earlier, according to executives at two banks who asked not to be named discussing internal figures. Qudian Inc., a Beijing-based online lender, said its delinquency ratio jumped to 20% in February from 13% at the end of last year. China Merchants Bank Co., one of the country’s biggest providers of consumer credit, said this month that it “pressed the pause button” on its credit-card business after a “significant” increase in past-due loans. An estimated 8 million people in China lost their jobs in February.
“These issues in China are a preview of what we should expect throughout the world,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.
cont..................
China Suffers Economic Double-Whammy
China Suffers Economic Double-Whammy As Current Global Demand Collapse Follows Earlier Supply Crash
by Tyler Durden ZeroHedge
As the first quarter is about to close, many Chinese factories are still operating below full capacity, have been gradually ramping up production over the last several weeks as government data suggests the country's pandemic curve has flattened.
But as Bloomberg notes, there is a serious problem developing, one where the virus crisis is locking down the Western Hemisphere, has resulted in firms from Europe and the US to cancel their Chinese orders en masse, triggering the second shockwave that is starting to decimate China's industrial base.
A manager from Shandong Pangu Industrial Co. told Bloomberg that 60% of their orders go to Europe. In recent weeks, manager Grace Gao warned that European clients are requesting orders to be delayed or canceled because of the virus crisis unfolding across the continent.
"It's a complete, dramatic turnaround," Gao said, estimating that sales in April to May could plunge by 40% over the prior year. "Last month, it was our customers who chased after us checking if we could still deliver goods as planned. Now it's become us chasing after them asking if we should still deliver products as they ordered."
A twin shock has emerged, one where China shuttering most of its industrial base from mid-January through early March, generated a supply shock. Now, as those Chinese firms add capacity, expecting to be met with a surge in demand from Western companies, that is not the case and is resulting in a demand shock.
"It is definitely the second shockwave for the Chinese economy," said Xing Zhaopeng, an economist at Australia & New Zealand Banking Group. The pandemic across the world "will affect China manufacturing through two channels: disrupted supply chains and declining external demand."
With orders canceled, supply chains disrupted, and payments delayed – the road to recovery in China is going to be a bumpy one at best. Overly optimistic analysts who have been touting a V-shape recovery in China, thus the world, in the first half of the year, will likely be wrong, and as we've explained several times, the best case is a U-shape or even perhaps an L-shape.
"Manufacturers are seeing many cases where overseas clients regretted their orders or where goods can't be delivered due to customs closures in other countries," said Dong Liu, vice president of Fujian Strait Textile Technology Co. in southeastern China. Liu's factory was on the cusp of resuming full capacity this month until a demand shock severely dented export orders.
Nomura International HK Ltd warned earlier this week that China could be on the verge of "plummeting export growth in the coming months."
cont...............
Credit card defaults in China mark the beginning of a global consumer debt crisis
Bloomberg
Early indicators from China show overdue credit card debt swelled last month by about 50 per cent from a year earlier
Like millions of people around the world, Zhang Chunzi, 23, borrowed money she thought she’d be able to repay before the coronavirus pandemic changed everything.
Now laid off from her job at an apparel exporter in Hangzhou – one of China’s most prosperous cities – Ms Zhang is missing payments on 12,000 yuan (Dh6,210) of debt from her credit card and an online lending platform operated by Jack Ma’s Ant Financial.
“I’m late on all the bills and there’s no way I can pay my debt in full,” she said.
Her story is playing out in similar ways across China, where the virus outbreak has been taking lives and ravaging the economy for more than three months.
As Covid-19 works its way through the rest of Asia, Europe and the Americas – forcing countries into lockdown, driving up unemployment and pummeling small-business owners – analysts say it’s only a matter of time before stretched households worldwide start to default on their loans.
The early indicators from China aren’t pretty. Overdue credit card debt swelled last month by about 50 per cent from a year earlier, according to executives at two banks.
Qudian, a Beijing-based online lender, said its delinquency ratio jumped to 20 per cent in February from 13 per cent at the end of last year.
China Merchants Bank, one of the country’s biggest providers of consumer credit, said this month that it “pressed the pause button” on its credit card business after a “significant” increase in past-due loans.
An estimated eight million people in China lost their jobs in February.
“These issues in China are a preview of what we should expect throughout the world,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.
While the extent of the squeeze on consumers and their lenders will depend on the effectiveness of government efforts to contain the virus and shore up economies, the scope for pain is immense.
Household debt-to-gross domestic product ratios in countries such as France, Switzerland, New Zealand and Nigeria have never been higher, according to a January report from the Institute of International Finance.
In Australia, which has the highest household debt levels among G20 nations, the country’s largest lender said on Thursday that its financial assistance lines are receiving eight times the normal call volume.
A similar surge in queries has flooded lenders in the United States, where credit card balances swelled to an unprecedented $930 billion (Dh3.41 trillion) last year and 3.28m people filed for jobless benefits during the week ended March 21 – quadruple the previous record.
Few places have seen a bigger jump in consumer borrowing in recent years than China, where household debt including mortgages soared to a record 55tn yuan (Dh28.46tn/US$7.74tn) in 2019.
That figure has nearly doubled since 2015, thanks to a housing boom and the rise of online lenders like Ant Financial.
While the company’s risk models rely on reams of payments data, they have yet to be tested by a major economic downturn.
Many consumers who take out these short-term, high-interest loans – typically funded by banks through Ant’s Alipay smartphone app – have minimal income and virtually no credit history.
“Since 2015, banks have kept lowering their criteria to compete,” said Zhang Shuaishuai, an analyst at China International Capital.
“The virus outbreak accelerated their exposure to risks. It will only get worse if unemployment climbs further.”
Ant declined to comment.
Consumer default rates at some banks have already increased to as high as 4 per cent from about 1 per cent before the outbreak, according to Zhao Jian, head of Atlantis Financial Research, who cited a survey of lenders.
An executive at one major Chinese bank said his company is taking steps to tighten credit card loans or even drop some clients after seeing a rapid increase in overdue payments.
With corporate delinquencies rising as well, banks could face a 5.2tn yuan surge in total nonperforming loans and an unprecedented 39 per cent slump in profits this year, according to a worst-case scenario outlined by UBS Group analysts this month.
Massive government stimulus will help ease the blow. Most countries have announced plans for economic support measures in recent months, such as a $2tn package in the US that will provide direct payments to lower and middle-income Americans.
Some of the biggest US lenders have pledged to offer grace periods for mortgage borrowers affected by the crisis.
In China, authorities have flooded the financial system with liquidity and encouraged banks to step up their lending to small businesses that employ about 80 per cent of the nation’s workforce.
While most banks have yet to offer debt relief to consumers outside those living in cities like Wuhan that were hit especially hard by the virus, UBS predicts China’s government will do more if needed to help people find jobs and pay their bills.
Bloomberg Economics said that about 85 per cent of the economy was back online in the week ending March 20, excluding the centre of the virus outbreak in Hubei province.
“A large scale increase in unemployment, and resulting high delinquencies on retail loans won’t be tolerated by authorities as social stability is their bottom line,” said May Yan, a Hong Kong-based analyst at UBS.
Yet stimulus is unlikely to tide over everyone, particularly in places like China where household finances are stretched like never before.
The country’s consumer debt-to-income ratio surged to 92 per cent at the end of 2018 from 30 per cent a decade ago, surpassing Germany and closing in on levels in the US and Japan, according to IIF.
The risk is that a prolonged economic slump and weak real estate market will force more people to renege on their loans.
China is heading for a Crushing cycle of Repricing in Real Estate and a HUGE loss in their Global Export markets. The Combinations of Real Estate and Manufacturing/Export markets correcting together will drive Unemployment in China above 10% and this ""Come to Jesus"" moment for XI and His fellow Communists is going to CRUSH both the Shadow and National Banking System. The Credit Defaults have already begun.
China’s property sector is at the epicentre of the crisis
China’s property sector is at the epicentre of the crisis
by Paul Hodges
Second-order impacts are starting to appear as a result of China’s lockdowns. These are having a big impact on the critical property sector, which makes up as much as 25 per cent of gross domestic product.
Housing sales fell almost 40 per cent in February and seem likely to be down again in March, while developer Evergrande cut prices to try and maintain its cash flow. This creates growing risk in the offshore dollar market, where property developers have been significant borrowers, with Fitch already warning of possible defaults. It is unclear whether local authorities can provide much support, as their dependence on revenue from land sales means their own position is weakening.
cont...............
A Global Consumer Default Wave Is Just Getting Started in China
A Global Consumer Default Wave Is Just Getting Started in China
Bloomberg News
(Bloomberg) -- Like millions of people around the world, Zhang Chunzi borrowed money she thought she’d be able to repay before the coronavirus changed everything.
Now laid off from her job at an apparel exporter in Hangzhou -- one of China’s most prosperous cities -- the 23-year-old is missing payments on 12,000 yuan ($1,700) of debt from her credit card and an online lending platform operated by Jack Ma’s Ant Financial. “I’m late on all the bills and there’s no way I can pay my debt in full,” Zhang said.
Her story is playing out in similar ways across China, where the virus outbreak has been taking lives and ravaging the economy for more than three months. As Covid-19 works its way through the rest of Asia, Europe and the Americas -- forcing countries into lockdown, driving up unemployment and pummeling small-business owners -- analysts say it’s only a matter of time before stretched households globally start to default on their loans.
The early indicators from China aren’t pretty. Overdue credit-card debt swelled last month by about 50% from a year earlier, according to executives at two banks who asked not to be named discussing internal figures. Qudian Inc., a Beijing-based online lender, said its delinquency ratio jumped to 20% in February from 13% at the end of last year. China Merchants Bank Co., one of the country’s biggest providers of consumer credit, said this month that it “pressed the pause button” on its credit-card business after a “significant” increase in past-due loans. An estimated 8 million people in China lost their jobs in February.
“These issues in China are a preview of what we should expect throughout the world,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.
cont..................
China Suffers Economic Double-Whammy
China Suffers Economic Double-Whammy As Current Global Demand Collapse Follows Earlier Supply Crash
by Tyler Durden ZeroHedge
As the first quarter is about to close, many Chinese factories are still operating below full capacity, have been gradually ramping up production over the last several weeks as government data suggests the country's pandemic curve has flattened.
But as Bloomberg notes, there is a serious problem developing, one where the virus crisis is locking down the Western Hemisphere, has resulted in firms from Europe and the US to cancel their Chinese orders en masse, triggering the second shockwave that is starting to decimate China's industrial base.
A manager from Shandong Pangu Industrial Co. told Bloomberg that 60% of their orders go to Europe. In recent weeks, manager Grace Gao warned that European clients are requesting orders to be delayed or canceled because of the virus crisis unfolding across the continent.
"It's a complete, dramatic turnaround," Gao said, estimating that sales in April to May could plunge by 40% over the prior year. "Last month, it was our customers who chased after us checking if we could still deliver goods as planned. Now it's become us chasing after them asking if we should still deliver products as they ordered."
A twin shock has emerged, one where China shuttering most of its industrial base from mid-January through early March, generated a supply shock. Now, as those Chinese firms add capacity, expecting to be met with a surge in demand from Western companies, that is not the case and is resulting in a demand shock.
"It is definitely the second shockwave for the Chinese economy," said Xing Zhaopeng, an economist at Australia & New Zealand Banking Group. The pandemic across the world "will affect China manufacturing through two channels: disrupted supply chains and declining external demand."
With orders canceled, supply chains disrupted, and payments delayed – the road to recovery in China is going to be a bumpy one at best. Overly optimistic analysts who have been touting a V-shape recovery in China, thus the world, in the first half of the year, will likely be wrong, and as we've explained several times, the best case is a U-shape or even perhaps an L-shape.
"Manufacturers are seeing many cases where overseas clients regretted their orders or where goods can't be delivered due to customs closures in other countries," said Dong Liu, vice president of Fujian Strait Textile Technology Co. in southeastern China. Liu's factory was on the cusp of resuming full capacity this month until a demand shock severely dented export orders.
Nomura International HK Ltd warned earlier this week that China could be on the verge of "plummeting export growth in the coming months."
cont...............
Credit card defaults in China mark the beginning of a global consumer debt crisis
Bloomberg
Early indicators from China show overdue credit card debt swelled last month by about 50 per cent from a year earlier
Like millions of people around the world, Zhang Chunzi, 23, borrowed money she thought she’d be able to repay before the coronavirus pandemic changed everything.
Now laid off from her job at an apparel exporter in Hangzhou – one of China’s most prosperous cities – Ms Zhang is missing payments on 12,000 yuan (Dh6,210) of debt from her credit card and an online lending platform operated by Jack Ma’s Ant Financial.
“I’m late on all the bills and there’s no way I can pay my debt in full,” she said.
Her story is playing out in similar ways across China, where the virus outbreak has been taking lives and ravaging the economy for more than three months.
As Covid-19 works its way through the rest of Asia, Europe and the Americas – forcing countries into lockdown, driving up unemployment and pummeling small-business owners – analysts say it’s only a matter of time before stretched households worldwide start to default on their loans.
The early indicators from China aren’t pretty. Overdue credit card debt swelled last month by about 50 per cent from a year earlier, according to executives at two banks.
Qudian, a Beijing-based online lender, said its delinquency ratio jumped to 20 per cent in February from 13 per cent at the end of last year.
China Merchants Bank, one of the country’s biggest providers of consumer credit, said this month that it “pressed the pause button” on its credit card business after a “significant” increase in past-due loans.
An estimated eight million people in China lost their jobs in February.
“These issues in China are a preview of what we should expect throughout the world,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.
While the extent of the squeeze on consumers and their lenders will depend on the effectiveness of government efforts to contain the virus and shore up economies, the scope for pain is immense.
Household debt-to-gross domestic product ratios in countries such as France, Switzerland, New Zealand and Nigeria have never been higher, according to a January report from the Institute of International Finance.
In Australia, which has the highest household debt levels among G20 nations, the country’s largest lender said on Thursday that its financial assistance lines are receiving eight times the normal call volume.
A similar surge in queries has flooded lenders in the United States, where credit card balances swelled to an unprecedented $930 billion (Dh3.41 trillion) last year and 3.28m people filed for jobless benefits during the week ended March 21 – quadruple the previous record.
Few places have seen a bigger jump in consumer borrowing in recent years than China, where household debt including mortgages soared to a record 55tn yuan (Dh28.46tn/US$7.74tn) in 2019.
That figure has nearly doubled since 2015, thanks to a housing boom and the rise of online lenders like Ant Financial.
While the company’s risk models rely on reams of payments data, they have yet to be tested by a major economic downturn.
Many consumers who take out these short-term, high-interest loans – typically funded by banks through Ant’s Alipay smartphone app – have minimal income and virtually no credit history.
“Since 2015, banks have kept lowering their criteria to compete,” said Zhang Shuaishuai, an analyst at China International Capital.
“The virus outbreak accelerated their exposure to risks. It will only get worse if unemployment climbs further.”
Ant declined to comment.
Consumer default rates at some banks have already increased to as high as 4 per cent from about 1 per cent before the outbreak, according to Zhao Jian, head of Atlantis Financial Research, who cited a survey of lenders.
An executive at one major Chinese bank said his company is taking steps to tighten credit card loans or even drop some clients after seeing a rapid increase in overdue payments.
With corporate delinquencies rising as well, banks could face a 5.2tn yuan surge in total nonperforming loans and an unprecedented 39 per cent slump in profits this year, according to a worst-case scenario outlined by UBS Group analysts this month.
Massive government stimulus will help ease the blow. Most countries have announced plans for economic support measures in recent months, such as a $2tn package in the US that will provide direct payments to lower and middle-income Americans.
Some of the biggest US lenders have pledged to offer grace periods for mortgage borrowers affected by the crisis.
In China, authorities have flooded the financial system with liquidity and encouraged banks to step up their lending to small businesses that employ about 80 per cent of the nation’s workforce.
While most banks have yet to offer debt relief to consumers outside those living in cities like Wuhan that were hit especially hard by the virus, UBS predicts China’s government will do more if needed to help people find jobs and pay their bills.
Bloomberg Economics said that about 85 per cent of the economy was back online in the week ending March 20, excluding the centre of the virus outbreak in Hubei province.
“A large scale increase in unemployment, and resulting high delinquencies on retail loans won’t be tolerated by authorities as social stability is their bottom line,” said May Yan, a Hong Kong-based analyst at UBS.
Yet stimulus is unlikely to tide over everyone, particularly in places like China where household finances are stretched like never before.
The country’s consumer debt-to-income ratio surged to 92 per cent at the end of 2018 from 30 per cent a decade ago, surpassing Germany and closing in on levels in the US and Japan, according to IIF.
The risk is that a prolonged economic slump and weak real estate market will force more people to renege on their loans.
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