The Global Sell Off Has Started in China…

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by Milkdud2000

China is in a bear market, we are seeing a huge price decline in Chinese Equities and high yield bonds. US and international media are failing to report the true state of the Chinese Economy.

This report illustrates the current situation in China. China is in a bear market, we are seeing a huge price decline in Chinese Equities and high yield bonds.

The world media and financial institutions are failing to report how bad China really is. An accelerated sell off in the High Yield Bond market will cause selling pressure in China Investment Grade Bonds that will roll over into the world markets.

Ticker “HSI” tracks China Stocks from the Hong Kong Market.

KEY TAKEAWAYS The Hang Seng Index (HSI) is a benchmark for blue-chip stocks traded on the Hong Kong stock finance.yahoo.com/quote/%5EHSI/

52 week high was 31,183.36,

Current Price (October 8th 2021) is 24,837.85

To calculate percentage loss, we do – current price/all time high price = 24,837.84/31,183.36 = .79 – So China is down around 20 percent since February of 2021.

What Is a Bear Market?

A bear market is when a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.

www.investopedia.com/terms/b/bearmarket.asp

Technically Chinese Stocks are in a bear market – and I’m calling it here.

FXI – Is China large cap etf – 39.57/53.58 = .73% = China Large Cap down 27%. Bear Market

finance.yahoo.com/quote/FXI?p=FXI&.tsrc=fin-srch

CQQQ – Is China Tech etf – 67.35/106.24 = .63% so tech s down 37% – Tech Bear Market

finance.yahoo.com/quote/CQQQ?p=CQQQ&.tsrc=fin-srch

CHIQ – Is China Consumer DIscretionary ETF

28.48/35.70 = .79 or down 21% which is also a bear market.

finance.yahoo.com/quote/CHIQ?p=CHIQ&.tsrc=fin-srch

CHIX – Chinese Financials

14.35/16.91 = .84 or down 16 percent (Almost bear market)

See also  China's bond market collapsing is the canary in the financial coal mine

finance.yahoo.com/quote/CHIX?p=CHIX&.tsrc=fin-srch

CN – ALL CHINA STOCK ETF

40.82/53.32 = .76 or down 24 percent (Bear Market)

finance.yahoo.com/quote/CN?p=CN&.tsrc=fin-srch

It is clear that almost anywhere you look in China, Assets are down over 20 percent, which is technically a bear market.

Next, I want to look at some of the bonds.

  1. Evergrande China and Fantasia are two construction companies that issued hundreds of billions in bonds and are now failing to pay.

Evergrande has reportedly missed recent bond payments as the developer fights to fend off default –

The current bid for Evergrande bonds is 21 cents for the March 2022 bonds. They are trading dirty (no interest being paid) and if you buy today and can hold for 6 months you will make 846 percent – This tells me a default is coming.

www.boerse-frankfurt.de/bond/xs1982036961-china-evergrande-group-9-5-19-22China Evergrande Bonds –

Ratings agencies have downgraded Chinese developers Fantasia Holdings and Sinic Holdings over risks from their strained cash flow situations.

Dont forget Sinic Holdings –

finance.yahoo.com/quote/2103.HK?p=2103.HK&.tsrc=fin-srch

HONG KONG — Chinese property developer Fantasia Holdings Group has failed to repay a maturing bond and a loan in the latest sign of distress among the country’s real estate companies.

Like bigger rival China Evergrande Group, Fantasia is based in Shenzhen and has been grappling with excessive debt amid a credit crunch.

Fantasia said in a filing in Hong Kong on Monday evening that it had failed to redeem a $205.7 million bond due that day. It also failed to repay a short-term loan of 700 million yuan ($108.56 million) due then to Country Garden Services Holding, which has a pending deal to buy much of Fantasia’s property management business.

asia.nikkei.com/Business/Markets/China-debt-crunch/Chinese-property-developer-Fantasia-fails-to-repay-bond

Fantasia Bonds Fell off a Cliff

International bonds: Fantasia Holdings Group, 10.875% 9jan2023, USD – XS2100005771

cbonds.com/bonds/670053/

The Evergrande and Fantasia bonds are down 80 percent currently. This means that around $240bn was wiped from the Evergrande Bond Market Cap.

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Fantasia total debt is much smaller to Evergrande, around $12.5BN – however…

Fantasia downgraded to default status by rating companies as Chinese property sector crisis worsens

  • Missed debt payment by Fantasia this week adds to China property sector concerns spawned by Evergrande’s liquidity crisis
  • S&P, Fitch and Moody’s all cut Fantasia to default or near default status

www.scmp.com/business/banking-finance/article/3151335/fantasia-downgraded-default-status-rating-agencies-chinese

In conclusion, 20 percent plus sell offs in Chinese Equities, coupled with the Evergrande and Fantasia High Yield Problem, will lead the world into a global recession.

There is one part of the China Market that has not taken a hit.

CBON – China Bond ETF (high quality bonds)

​

finance.yahoo.com/quote/CBON?p=CBON&.tsrc=fin-srch

Chinese Investment Grade bonds have held well. No major price decline. My guess is once this ETF starts to crash – we will really start to see global selling. I would watch the CBON ETF to gauge when things really start to hit the fan.

Edit Haven’t seen this in the news, but Ping An Bank in china appears to have collapsed because of Evergrande debt – protestors who lost their money are now singing the national anthem in-front of their building

twitter.com/__inty__/status/1446283536097415172?s=21

Tl:dr: The Chinese stock markets are in an official bear market – down 20% plus over an extended period. China Evergrande and Fantasia bonds are down 80% and the only place that hasn’t sustained losses in China is the CBON investment grade index. China is in a bear market and has the potential to cause a major global sell off. This risk is not being reported fairly by media and financial institutions.

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