China
KWEB LONG: DOUBLE DIAMOND + CHANNEL BOTTOM + OSCILLATORS1. Price has drawn 2 diamonds (diamond in diamond) at the bottom of the increasing (purple) channel. Buy signal.
2. A cycle with a length of 756 days (25 months) is found, according to which the price is now at the bottom of the cycle. Buy signal.
3. All major oscillators and indicators are in oversold zones and give long signals.
4. It is necessary to remember about the resistance of the local downtrend (orange).
* At the same time, the fundamental background in China is still negative.
I entered a long position with a trailing stop loss below the lower edge of the small diamond. After breaking through and/or retesting the upper edge of a large diamond, and then after breaking through the orange resistance, I will buy more. In case the price falls, my trailing sell order will save me.
Not advice. Not a financial recommendation.
WTF is Happening with Evergrande ???‼️💥Excerpt from Petition:" Source from Petition LLC
"Shenzhen-based The Evergrande Group ($EGRNF) is China’s second largest property developer by sales and the 122nd largest developer in the world by revenue according to the 2021 Fortune Global 500 List.* While its core business is buying land and developing it into residential real estate, it is really an investment holding company that, in addition to property development, dabbles (or dabbled, as the case may be) in hotel operations, finance, internet businesses (for real estate and automobile sales), professional sports, theme parks, mineral water and health industry businesses. This sucker has had its tentacles in a lot of pots over the years, leveraging billionaire founder Xu Jiayin’s charisma and close contacts to the government to chase whatever the “it” thing of the moment was in Chinese spheres (i.e., electric cars).**
It also happens to be levered to the tits.
It also happens to be generally indebted to the tits.
It also happens to be delinquent AF on a lot of those debts and deeply in trouble.
And it is very much at the mercy of the Chinese government which, as of about a year ago, has been on a very public crusade to tamp down on over-leveraged private companies (implemented via “three red lines”*** meant to forestall a systemic crisis). Evergrande may very well be the poster child of the very type of company the Chinese government had in mind.
Pundits are dubbing Evergrande’s emergent financial crisis China’s “Lehman” and the markets are flustered (the Dow closed down over 600 points after taking a 900+ point tumble yesterday afternoon after The Hang Seng got napalmed in afternoon trading with real estate giants like Henderson Land Development Co. ($HLDCY) getting hammered).
Part II. The Extent of the Problem.
Evergrande is a behemoth; it owes a smorgasbord of creditors including (i) banks, (ii) contractors doing the work, (iii) foreign bondholders, (iv) local investors (who often times also double as employees), and (v) homebuyers who paid in advance for (reportedly 1.6mm) new properties that Evergrande is apparently struggling to complete. At this point the question really ought to be ‘who doesn’t this company owe money to?’ The company has raised billions in debt from foreign investors (some of which trades as low as 20-30 cents on the dollar now) in addition to funds raised from over 80k retail investors to fund its construction projects across greater China. $7.4b in bond payments are due in 2022 alone and that’s after the company deals with $669mm in coupon payments through the end of ‘21 (including $615mm of that on the company’s dollar bonds).
With amounts that staggering, the last thing creditors need to hear is some sort of inkling that the company may not be able to make near-term interest payments and otherwise appear creditworthy or, alternatively, that the Chinese government won’t bail the company out because it wants to teach over-levered corporates a lesson in financial responsibility.
Indeed, interest payments due this week on certain of the company’s bank loans are not going to be made. This obviously calls into question whether the company will satisfy coupon payments of $83.5mm on September 23 and $45.17mm on September 29 on certain of its dollar-denominated notes.
Given all of this, unsurprisingly, the company’s Hong Kong-traded shares have nosedived 90% in the past year and continued the rapid descent on Sunday going into Monday.
Which only stands to reason. Last week Fitch — always late to the party — declared that default “appears probable” and Moody’s indicated that both cash and time are on short supply for Evergrande. S&P Global Ratings piled on (per Bankruptcy Data):
The liquidity and funding access of China Evergrande Group are shrinking severely, as demonstrated by an announced material drop in sales, a fall in the cash balance and the continued use of physical properties to settle payments, according to S&P Global Ratings. The Company is negotiating repayment terms and two of its subsidiaries have failed to meet guarantee obligations on wealth management products to retail investors. The ratings agency believes the Company may not be able to service debt in time, which will lead to a default scenario including the possibility of debt restructuring. Therefore, on September 15, 2021, S&P Global downgraded Evergrande and its subsidiaries Hengda Real Estate Group Co. Ltd. and Tianji Holding Ltd. to CC from CCC and its long-term issue rating on the U.S. dollar notes issued by Evergrande and guaranteed by Tianji to C from CCC-.
Such worsening parameters, coupled with the appointment of financial advisors to evaluate the Company's liquidity and explore solutions to ease the situation, imply that Evergrande's default scenario, which could include debt restructuring, is a virtual certainty, the ratings agency states.
AllianceBernstein is saying Evergrande is in crisis, the effects of which might spillover into wider parts of the Chinese economy, creating a systemic problem. The markets on Monday appeared to buy into this thinking, relying on Evergrande to spark a long overdue market correction.
All of this has a lot of people understandably afraid and extremely pissed off.
III. Who Might Get F*cked?
A. Depositors.
Among them Evergrande’s customers.
It’s hard to say exactly but it looks like Evergrande is pretty darn close to a straight-up Ponzi scheme. They collect pre-sale deposits for apartments and then use those deposits to accelerate construction on other homes that they then put up for sale and rinse, wash and repeat. This works, we suppose, when there’s demand. Lately demand has come crashing down in China thanks in large part to the government’s effort to wean the economy off of the corrupt real estate teat, significantly weakening a primary revenue stream.
And potentially weakening the Chinese middle class. As indicated by those insane GDP figures above, real estate in China is like religion. Lots of those depositors hanging in the wind are people who put down deposits thinking their new apartments constituted a sound investment. As this writer notes:
“All over China, salesclerks and factory workers are sitting on empty Evergrande apartments and dreaming of selling them at a big mark-up to fund their children’s study abroad or their own retirement.”
😬😬😬😬
B. Employees
Apparently it’s pretty common in China for owners and employees of highly levered Chinese companies to buy “wealth management products” from said companies to help finance them when they’re in dire need. Indeed, Evergrande reportedly tapped into approximately 70 to 80 percent of its workforce back in April for large sums of money, threatening to withhold bonuses of employees who declined to provide Evergrande short-term loans. What happened next is unconscionable. Per the NYT:
Some workers tapped their friends and family for money to lend to the company. Others borrowed from the bank. Then, this month, Evergrande suddenly stopped paying back the loans, which had been packaged as high-interest investments.
Now, hundreds of employees have joined panicked home buyers in demanding their money back from Evergrande, gathering outside the company’s offices across China to protest last week.
Whoops.
Of course, each of these creditors should, in a fair world, be treated similarly but, of course, you have the extra bonus here of a bunch (six, actually) of scumbag senior Evergrande executives who, seeing the writing on the wall, secured redemptions of their investments. They got busted, however, and the company indicated that the funds would be returned and that those executives would be on the receiving end of some good ol’ fashioned Chinese retribution. Thoughts and prayers to those fools.
C. Bondholders.
A different kind of punishment may extend far and wide. If Evergrande fails, reverberations will be extensive. Per the NYT:
Panic from investors and home buyers could spill over into the property market and hit prices, affecting household wealth and confidence. It could also shake global financial markets and make it harder for other Chinese companies to continue to finance their businesses with foreign investment. Writing in The Financial Times last week, the billionaire investor George Soros warned that an Evergrande default could cause China’s economy to crash.
Soros wrote:
Xi Jinping, China’s leader, has collided with economic reality. His crackdown on private enterprise has been a significant drag on the economy. The most vulnerable sector is real estate, particularly housing. China has enjoyed an extended property boom over the past two decades, but that is now coming to an end. Evergrande, the largest real estate company, is over-indebted and in danger of default. This could cause a crash.
The signals are there. Chinese high yield is getting crushed. Construction operators are getting annihilated across the board. And the stress is spreading to banks and financials. Even some Chinese investment grade issuance is beginning to look shaky.
Which is precisely why Ed Yardeni thinks that, ultimately, the Chinese government will be resigned to step in. There are signs that Beijing regulators are playing some ball: they’ve agreed to permit Evergrande to renegotiate payment deadlines with banks and other creditors in an attempt to sort through this hot mess. Some banks are accommodating. Per Bloomberg:
China Minsheng Banking Corp., China Zheshang Bank Co. and Shanghai Pudong Development Bank Co. had agreed to give Evergrande extensions on some project loans. Citic Trust, one of the developer’s biggest non-bank lenders, has given preliminary approval to a three-month extension on loans that were due in August, a person familiar with the matter said.
And there are additional signs that the government is growing concerned: late last week it infused $14b of short-term cash into its banking system.
But what if, beyond this small level of initial latitude, the Chinese government doesn’t intervene? Bondholders are reportedly scrambling to hedge their positions but failing to do so; they’re apparently beginning to realize that this whole situation may turn into the Hunger Games. Also per Bloomberg:
Investors in China Evergrande Group’s bonds are struggling to find a hedge to cushion their losses as the troubled real estate giant nears what could be one of China’s biggest debt restructurings.
Banks’ trading desks are reluctant to offer hedging tools after some of them suffered losses earlier in the year, and due to the sparse trading of Evergrande’s CDS, according to people familiar with the matter who were not authorized to speak publicly about the matter.
Owners of Evergrande’s $19 billion in dollar bonds are currently watching their investment shrivel as they wait to find out if Beijing will step in to halt its downward spiral. For money managers used to relying on the $10 trillion swaps market to hedge downside risks, it’s an extraordinary situation.
Also per Bloomberg:
China Evergrande Group may undergo one of the country’s biggest-ever debt restructurings, if the developer’s distressed-level bond prices are any indication.
It’s “almost unavoidable,” said Nomura International Hong Kong Ltd. credit analyst Iris Chen. Her base case is a government-supervised deal that ensures Evergrande delivers homes and pays suppliers, where dollar debt investors would get 25% of their money back. Luther Chai, a senior research analyst at CreditSights Singapore LLC, also predicts Evergrande may default and enter restructuring. That risk is being priced in, with many of Evergrande’s dollar bonds trading near 30 cents.
Others are casting a similarly pessimistic outlook:
Evergrande restructures its debt and bondholders recover a portion of their funds. This would be an “orderly wind down,” says Omotunde Lawal, head of Barings LLC’s emerging-market corporate debt group. There may be some contagion across China’s property issuers at first, according to Nomura’s Chen, though sentiment would improve as a key overhang would be removed. She expects only a 5% recovery rate for investors in Evergrande unit Scenery Journey Ltd.
Annnnd others are evaluating the doomsday scenario:
Liquidation is a scenario where bondholders may get close to nothing. This is unlikely, says CreditSights’s Chai, because it would “wreak havoc across China’s property and banking sectors, as well as related companies such as Evergrande’s suppliers.” Morgan Stanley analysts say “all parties are incentivized to avoid a liquidation scenario” in the restructuring of any Chinese property developer. Chairman Hui Ka Yan, who controls more than 70% of Evergrande’s equity -- would lose a significant portion of his wealth.
Another negative scenario would involve Evergrande bringing some of its off-balance sheet debt -- which may include pledged assets -- back into the books, according to Nomura’s Chen. These assets could have priority over the dollar bonds in a recovery and if the off-balance sheet debt is higher than expected, bondholders could get less than 15% of their money back.
And still others are trying to be sanguine:
A complete or partial takeover by a state-owned enterprise is another possibility, though Nomura’s Chen assigns a low probability to this scenario. Evergrande could also sell its listed assets at better prices if market conditions improve, says Chen, which she predicts would give bondholders a recovery rate of 30% or more.
Evergrande could buy some time to improve its liquidity over the next year, according to Chai at CreditSights. In this scenario, Evergrande would repay some of its nearest-term dollar bonds upon maturity. The developer has two sizeable dollar bonds due over the next 12 months, or a combined $3.5 billion to pay.
Whatever. Any which way you slice it…
That’s right. The company’s most active dollar-denominated bonds — the 8.75% notes due in June 2025 — have freefalled from 84 cents at the end of May to 31 cents late last week. Similarly, the shortest-maturity bonds — due in March ‘22 — are down to 35 cents on the dollar from 99.6 cents at the end of May. The company has hired restructuring advisors: Houlihan Lokey Inc. ($HLI) and Admiralty Harbour Capital. In turn, certain bondholders have reportedly hired Kirkland & Ellis LLP and Moelis & Co. ($MC). No doubt other firms will be getting calls. Per Bloomberg:
With 13 outstanding dollar bonds, including one note touted as one of the most widely traded in the world, and a diverse group of bondholders globally, getting organized is going to be tricky.
Especially as funds trade in and out of the paper. Per Bloomberg:
Saba Capital Management, Redwood Capital Management, Contrarian Capital Management and Silver Point Capital are among funds that have built positions in offshore bonds of China Evergrande Group’s ahead of a likely default of the real estate giant.
The four investors are among the credit funds that took a position in Evergrande’s $19 billion dollar-denominated notes in recent weeks, as prices fell to about 25% of face value amid uncertainties over the future of China’s second largest developer, according to people with knowledge of the matter who asked not to be identified because the transactions are private.
You know the old saying: one company’s crisis is a lot of vulture funds’ opportunity.
Anyway, there very well may be quite a bit of asymmetric upside when you’re buying in at 25 cents on the dollar but Johnny seems to remember a time when buyside shops were VERY skittish about political risk enveloping foreign credits. But what’s a little political risk when you’ve got money to deploy and not many other distressed opportunities to play in? YOLO b*tches! 🤷♀️
D. Commodities
Take a look at prices for steel and copper on TradingView , among other things, and it’s ugly AF. There was the largest drop in steel output ever in August. Take a look at these charts:
E. The Chinese Consumer & American Companies Catering Thereto
Evergrande directly and indirectly contributes approximately 3.8mm jobs. It’s employees and suppliers are now potential victims of Evergrande’s predicament. As the government cracks down on various industries and Evergrande wavers, the consumer is getting a bit flustered. Retail sales recently dropped 11% off trend and all indicators reflect sluggish consumer confidence. This could end up affecting large US companies with China dependency. Maybe this is the reason why Apple Inc. ($AAPL) is 10% off its recently set ATH — a reason that doesn’t entirely have to do with an underwhelming product launch or misunderstood injunction.
It’s unclear. The state will likely extract enough flesh to make sure Chinese bank loans are safe. Contractors likely have security by way of mechanic’s liens and the like. But then there are the bondholders, investors and employees. Things could get ugly for them.
In the meantime, Evergrande will likely flood the market with existing property assets, and look to engage in a tremendous amount of liability management across double-digit debt issuances. It could explore selling more equity (LOL…ain’t gonna happen — especially after recent equity issuances have tanked). Or declare bankruptcy. Or…OR…get a bail out.
It’s all exasperating. What’s odd is that this has all been out there for over a year. From Fortune:
“It’s a confus world when equity markets are generally within a couple percent or so of their record highs whilst we’re seeing the biggest dollar-Asian-high-yield company, Evergrande, with $300 billion of liabilities, on the brink, with no-one really aware of how the work-out will be managed and whether be contagion,” writes Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank, this morning in a markets note.
Perhaps everyone was distracted by a deadly pandemic.
This is a situation that we — along with the rest of the market — will be watching very closely.
F. Postscript
Is there a crypto component to all of this? This thread ⬇️ suggests there very well may be. This is something we’ll also be keeping an eye out for.
Points to Ponder😬🤔
*In 2018, Evergrande’s stock price made the company the world’s most valuable real estate company.
**Notably, as part of it a deleveraging sparked by a Chinese government crackdown on over leverage, the company has been divesting of non-core businesses of late. Mr. Jiayin recently stepped down as chairman of the property group; he was, before all of this transpired, roughly the 53rd richest person in the world.
***The three red lines include: (i) Liability-to-asset ratio (excluding advance receipts) of less than 70%, (ii) Net gearing ratio of less than 100%, and (iii) Cash-to-short-term debt ratio of more than 1x.
If the developers fail to meet one, two, or all of the ‘three red lines’, regulators would then place limits on the extent to which they can grow debt.
****And there’s a lot of questions as to whether this is even the right number given JV partnerships that Evergrande is part of that may carry debt off balance sheet.
📚Resources📚
We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. 💥You can find it here💥. We’ve recently updated the list to include some new releases such as “Damsel in Distressed: My Life in the Golden Age of Hedge Funds” by Dominique Mielle (formerly of Canyon Partners) and “The Platform Delusion: Who Wins and Who Loses in the Age of Tech Titans” by Jonathan Knee. We haven’t read either yet but they both certainly look interesting.
Ali-Foreman of the 21st century: Winnie the pooh vs the richestChinese regulatory crackdown is an exceptionally interesting phenomenon. Recently it got even more interesting as Xi Jinping, probably expecting the necessity of Evergrande bailout, suggested smoothing excessive incomes. Surprising? No. Some growth of populism has been seen in General Secretary’s actions for at least a year.
My prediction for upcoming months is simple: every time something good “happens” to Evergrande, the Communist Party will throw a punch at the wealthiest to show how much they regard the Chinese underpaid and overworked society. What does it mean for the European luxuries leader? In 2020, 34% of its revenues came from Asia excluding Japan (unsurprisingly, the majority of this 34% can be attributed to China). Adding the disappointing Chinese economic data to our equation, a decrease or LVMH’s revenues from Asia seems to be inevitable. Given that luxury goods are trading at a huge premium (that I don’t think I can justify) over the MSCI Europe, a short position on the industry leader looks very appealing.
Just before posting this idea, I checked the analysts’ consensus on LVMH. Apparently, the vast majority of them are optimistic. Well, I am not.
Hey anon.. you got the balls to buy 40k?! - BTC VLOG #58Some big dumps here with the Evergrande news... when I called 53k lower high it generally indicates probability is with further downside but it in no way can that predict events like potential real estate fueled recession in China.
No oracle outside of insiders can predict that. All you can get are hints and probabilities in the TA.
40 to 41k seems bottom of this range, if you have the cajones, and I love these moments... how many times did we touch 30k? Did you have the balls to buy that 30k?!
You got the balls to buy this 40k?! What's your invalidation?
Buy low sell high, buy range low, sell at your targets. Not telling anybody to buy, not goading people with toxic masculinity, just saying that since I started this vlog, betting on these range lows is where so much money is made.
PREDICTION = We want to test the range low.
=== TimeStamps ===
0:00 = Welcome
0:30 = BTC 1 day
1:25 = SPX500 check
5:20 = Possible patterns
6:40 = Adjusting fibs
9:15 = Weak descending wedge
11:20 = Lower high has rewarded me
12:30 = We can get back to bullish
13:45 = NASDAQ
14:25 = BTC 1 weekly
14:45 = BTC 1 monthly
15:45 = ROUGH PREDICTION
16:45 = ... mother of god DESC TRI
19:30 = Closing words
------------------
NOT FINANCIAL ADVICE, please don't trade off solely my ideas. Always do your own TA and develop your own convictions.
NIO: to Boost Its Battery Swap Stations' Coverage Along HighwaysThe company also has 341 supercharging stations with 2,176 supercharging piles, 515 destination charging stations with 2,878 piles and access to more than 400,000+ third-party charging piles.
The Chinese Lunar New Year holiday is a peak travel time for the public, and NIO wants to significantly expand its battery swap stations' coverage along highways before then to make it easier for its customers to travel by car.
The electric vehicle company announced Tuesday that it will have a battery swap network covering eight major highways and four densely populated metropolitan areas by the Chinese New Year in 2022.
The next Chinese New Year will come on February 1, 2022, and no official schedule has been released, but the holiday is usually seven days.
The holiday is typically a time for people working in major cities to return to their hometowns and will also see one of the world's largest population migrations, although it has waned in size in recent years due to Covid-19 concerns.
According to NIO's plan, the company hopes to complete a battery swap network along five north-south highways and three east-west highways by then.
The five north-south highways are G1 Beijing-Harbin Expressway, G2 Beijing-Shanghai Expressway, G4 Beijing-Hong Kong-Macao Expressway, G5 Beijing-Kunming Expressway, and G15 Shenyang-Haikou Expressway.
The three east-west highways are the G30 Lianyungang-Horgos Expressway, the G50 Shanghai-Chongqing Expressway, and the G60 Shanghai-Kunming Expressway.
The four metropolitan areas the company hopes to cover are Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, and Chengdu-Chongqing.
William Li, founder, chairman and CEO of NIO, said Tuesday that the company's number of battery swap stations covering the highway now stands at 99 and will increase to 169 by the Chinese New Year.
Notably, NIO has previously built battery swap networks covering the G2 Beijing-Shanghai Expressway and the G4 Beijing-Hong Kong-Macao Expressway.
On September 20, the company announced the completion of its battery swap network covering the G1 Beijing-Harbin Expressway, making it the third fully connected expressway battery swap network.
The G1 Beijing-Harbin Expressway is 1,229 kilometers long, and NIO has provided 10 battery swap stations along its route, one every 120 kilometers on average.
In addition, NIO announced on September 16 that with three new battery swap stations in highway service areas in operation, it has completed its network of battery swap stations in highway service areas from Beijing to all major cities in the surrounding area.
The network consists of 12 highway battery swap stations, centered on Beijing, covering the service areas in Hebei and Tianjin on seven highways: Beijing-Chengde, Beijing-Harbin, Beijing-Lhasa, Beijing-Chongli, Beijing-Shanghai, Beijing-Hong Kong-Macau, and Beijing-Qinhuangdao.
According to CnEVPost database, as of September 21, NIO had 484 battery swap stations in China.
This article was first published by Phate Zhang on CnEVPost, a website focusing on new energy vehicle news from China.
For the full article with the charts, please visit the original link.
Cataclysms are brewing in the global stock markets. China.All because of the situation with one of the largest developers in China - China Evergrande Group, which found itself on the verge of default (debt size ~ $ 300 billion).
The possible bankruptcy of the company will hurt not only the Chinese economy (remember Lehman Brothers).
Deposits in Chinese banks are about to $35 trillion, which is twice the size of the United States. Chinese financial crisis will lead to unforeseen circumstances and will affect all world markets.
Industrial production has negative rates in China. Now it is near the lowest level since the global financial crisis.
The devaluation of the yuan seems inevitable.
Best regards EXCAVO
Evergrande Explained: What Does It All Mean For Markets?Evergrande is something that most of you will have heard about lately, and if you haven’t… you should get the know about it.
This has been one of the main causes of the latest sell off in markets. Its affecting all financial markets from the stock market to the crypto market right now.
I want to explain why that’s the case and what impact it might have going forward…
What is Evergrande?
For anyone who has never heard of Evergrande or maybe has heard it but isn’t sure what it is…
Evergrande is Chinas 2nd largest Real Estate developer and 122nd largest company in the world.
They employ over 120,000 people.
They have over 1,300 building projects in China.
And importantly, they also have some of the largest company debt in the world…
They owe approximately 300 BILLION dollars.
And can’t afford to pay it back…
So What Does It All Mean & Why Is This Important?
Evergrande defaulting on its debt payments has shaken confidence in Chinese real estate markets and caused investors to “de-risk” their portfolios…
Its caused volatility and market sell offs in the stock market as investors or lender to Evergrande are no doubt selling assets to cover some the capital now at risk of default with Evergrande.
Its also made investors worry about a wider spread debt crisis or “contagion” event in markets where lenders or debtors to Evergrande are then also at risk if those debts are not paid back.
So Whats Going To Happen?
So while we outline what this does mean for markets its important to also outline what it doesn’t mean… There are fears that this could be a similar event to the real estate crisis in the US around 2008 where Lehman Brothers defaulted on their debts… and we all know how that ended right?
Well I don’t think this is the same… and more importantly I don’t think that the Chinese authorities would allow that to happen.
This event in some ways has been caused by the Chinese authorities trying to calm the excesses they knew about in the Chinese real estate market…
So I believe this is somewhat a controlled explosion by authorities in China that are looking to deleverage their market excesses.
If that is the case then the fear in the market currently of contagion risks and full blown market crisis is over exaggerated. That means there’s a real possibility that this COULD offer an opportunity to get a good entry into the market during this pullback.
ChinaYesterday saw some significant moves in several key macro factors. The charts below detail the sharp escalation in China stress (at the national, rather than real estate sector specific level) & the impact that had on broader risk appetite in markets.
The Evergrande story has been in motion for months. Up until yesterday, contagion had been restricted to immediate peers – Chinese real estate / financial names, a few Australian miners.
What changed yesterday was the move in Chinese Credit Default Swaps (CDS). Sovereign CDS liquidity is poor but the signal is unmistakeable – markets moved this from an idiosyncratic story to one with potentially far broader ramifications.
For the first time in a while the risk off move had a material impact on the credit markets – "European financial" & "high yield" bonds especially. Again, our models suggest this is very much a statistical abnormality.
The spike in VIX was a significant move on Qi models. VXEEM, VDAX (implied volatility measures for emerging markets and the DAX respectively) & the gold/silver ratio experienced similar moves.
What next?
China is the epicentre of current market moves & your view on how the Evergrande story unfolds is critical. China bears will see these factor moves as a genuine re-pricing. If so, Qi can high-light those markets that are lagging versus the new environment.
In times of stress it is more important than ever to quantify relationships between asset price & the macro environment.
LOOK UP™
Navigating the Evergrande into the Chinese Golden WeekThe Evergrande FUD is spreading, fuelled by western media looking for another Lehman moment to cover. The people selling the news have no clue to what extent the CCP plunge protection team is mandated to go to protect the real estate prices. After all real estate is 80% of household wealth, and if retail hurts, Xi's image will be tarnished. To make things more pressing, China is going into a 10 day long hibernation starting the 1st of October, the Golden Week where most services including financial markets will be closed.
TSLA Short down to the 700.00 Level Overall I've been bullish on this stock however with the markets sentiments going bearish because of the news in China. I am looking at TSLA to hit the 700.00 level which lines up with a major QP zone. We could also see further bearish sentiment down to the 638.00 levels.
BTC-Predictable as alwaysGood Morning traders!
Yesterdays PA was easy to understand if you new what to look for.
Retail traders are PREDICTABLE and therefore the markets movements are.
The market has moved exactly as anticipated, sweeping out the retail orders stacked at the bottom of the range.
We are now currently sitting on the neckline of a large head and shoulders pattern. These patterns are subjective, and become "valid" once we break and close under the neckline. Again don't you think whales and funds know of these patterns....
From this point onwards I will be looking to enter longs, however I will be prepared that price can easily pull right back to the yellow circle around 37k.
The current market is being influenced by the spx500 and Evergrande, how it will play out is anyone's best guess, but I would suggest the Chinese government will stop a default to stop toxic debt seeping into the greater market.
As always trade safe
EnvisionEJ
HSBC Bearish OptionsFamous short seller Jim Chanos let people think in the last interview that he shorted some banks which are overexposed in China.
The bank had hired for about 400 client-facing roles for its mainland digital wealth planning venture and will have about 700 personal wealth planners on the ground by the end of 2021.
Looking at the puts today and the 22usd strike prices for 2021-10-15, i think that is the direction we are heading to!
Is Evergrande the next Lehman Brothers ??China`s economic model is based on real estate investment to drive growth. 20 Mil apartment buildings per year.
China`s residential property is 20% of GDP every year. Too much!
Real estate activities in China close to 30% of GDP every year. Huge!
Chinese Government is Bashing the private sector, look at GOTU and BABA for example.
Evergrande, second largest property developer in China has more than $300 billion in debt!
Evergrande has $83.5 million interest payment Sept. 23 and a $42.5 million payment on Sept. 29
Failure to to pay in 30 days can put Evergrande in default.
Today Evergrande has a Market Cap of 30.099B! At its peak, Evergrande was traded 13.5X higher!
Evergrande’s potential debt blowup can send shock waves through financial markets!
Today was just the beginning.
XPeng Says P5 Had 6,159 Orders in 24 Hours of Official LaunchThe company said that 54 percent of those orders were for the LiDAR-equipped models.
XPeng Motors said Friday that it accumulated 6,159 orders for its new sedan, the P5, in the first 24 hours of its official launch.
The company announced Wednesday evening Beijing time that the P5 became available for order in China in six configurations with a subsidized price range of CNY 157,900 (USD 24,500) to CNY 223,900, and deliveries will begin in late October.
XPeng said today that 90 percent of these new orders are for models that support XPILOT 3.5 and XPILOT 3.0, its autonomous driving assistance system.
It's worth noting that this does not mean that all of these customers are subscribed to the XPILOT system, as they will need to spend additional money. XPeng did not disclose the percentage of customers who subscribed to the service.
XPeng debuted a new naming scheme for the P5 model, with the P representing the model's highest level of intelligence, followed by the E and G. The numbers in the names of the different models represent their NEDC ranges.
The P series, with the highest intelligence rating, offers a choice of 550 km and 600 km NEDC ranges, while the E and G series both offer a choice of 460 km and 550 km ranges.
Among these models, only two models of the P series are equipped with LiDAR, priced at CNY 199,900 and 223,900 respectively.
They can allow users to pay for a subscription to XPILOT 3.5 at a standard price of CNY 45,000, and users will be able to enjoy a discounted price of CNY 25,000 if they subscribe before delivery.
The two E series models are priced at CNY 177,900 and CNY 192,900 respectively. They allow users to pay for a subscription to XPILOT 3.0 at a standard price of CNY 36,000, and users will be able to enjoy a discounted price of CNY 20,000 if they subscribe before delivery.
The two models of the G series are priced at CNY 157,900 and CNY 172,900 respectively and do not support the XPILOT system.
This article was first published by Phate Zhang on CnEVPost, a website focusing on new energy vehicle news from China.
Dada Nexus Beats Q2 2021 Earnings Estimates, Growth AcceleratesCreating extra value for JD.com's 530 million active users will be the company's next strategic endeavor.
With the tumultuous unfolding around China's major New York-listed tech companies, plenty of mid-cap stocks have been affected as well, losing their market value in 2021. In some cases, however, investors' fear has little to nothing to do with the firms' real fundamentals.
Dada Nexus (DADA:NASDAQ) may be one such company. The Chinese operator of on-demand delivery and retail platforms recently posted its Q2 2021 financials. This time, the key results slightly exceeded both the analyst consensus and the firm's own projections, showing a pro forma revenue growth of 81.3% (the revenue recognition model was changed in April) and CNY 549 million in net loss – the Street's average expectation was CNY 615 million.
Dada was founded in 2014 as an "open local on-demand delivery platform" and took its present form after a merger with JD.com's (JD:NASDAQ) spinoff JDDJ in 2016; since the completion of that deal, it has been developing around a duo of products, boosting the core services' scope and building adjacent businesses and partnerships. In June 2020, the firm went public on Nasdaq, raising funds vital to stay competitive in the ongoing battle for Chinese consumers.
A growth-stage company, Dada is scrambling for a larger market share while moving towards profitability. Throughout the June quarter, its expansion continued.
This article looks at the key indicators' dynamics to analyze Dada Now and JDDJ's performance within those three months. We first crunch the newly reported data, then calculate key ratios to track the progress in financials and unit economics. To top it off, we provide a glance at Dada's tech initiatives beyond the two platforms.
"JD's over 530 million users" and COVID-19
In the twelve months through June 2021, the number of JDDJ's active users reached 51.3 million, increasing by 58.8% year-on-year. Dada relates this growth, among other things, to its cooperation with JD.com. During the earnings call, the company's executives stated that it "continued to win customers' trust" and is going to proceed with the "in-depth cooperation with JD to better serve the omnichannel and on-demand needs of JD's over 530 million active users." In addition, a new tool is being constructed at the intersection of the two digital ecosystems: 'Fujin', the former's entry point within the latter's app, has been tested in a handful of cities, including Shenzhen and Shanghai.
The duet's convergence is happening amid a post-COVID boom in the Chinese on-demand retail market. The number of users in the space has lately skyrocketed and is projected (link in Chinese) to grow at a 31% CAGR from 2019 to 2023. Consumers have changed their shopping habits forever.
It's also crucial that despite the magnitude of new possible outbreaks in China, this trend will remain strong, as the fix-cost-burdened offline stores are embracing online traffic. And Dada is among the country's top platforms that drive brick-and-mortar players' online sales, accelerating their adoption of digital tools.
From the ESG perspective, COVID-19 has pushed Dada Group to shoulder more social responsibility. Its executives stated that the company had worked "closely with local governments to provide the daily supplies and the on-demand delivery for the customers," and, as a result, "received recognition from the government."
More merchants, new partners and categories
Users are just a part – although the most critical one – of the story. The supply-side matters as much. As per the company, this quarter, JDDJ made significant progress in category expansion.
In retrospect, Dada started its business with groceries and has now covered a number of areas, such as pharma and apparel. By now, it has been taking the lead in the supermarket category and seeking partnerships with big chains. By the end of Q2 2021, hands had been shaken between Dada and "80 chains out of China's top 100."
The most recent attempt in the consumer electronics arena was emphasized a couple of times in the investor conference. As on-demand retailing has gradually been recognized by smartphone manufacturers, Dada has partnered with hundreds of distributors and established cooperation with Apple and vivo, among other major brands. Besides, the company stepped further into the PC category, cooperating with Microsoft, Asus, Dell and Alienware, among others. In response to an analyst's question, the executives disclosed that the potential of some new categories, including home appliances and cosmetics, will be further explored.
User acquisition at full pelt
In Q2, Dada's total expenses have added to around CNY 2.21 billion. The sales and marketing cost grew from CNY 386 million in Q2 2020 to CNY 824 million in Q2 2021. According to the unaudited financial results, this boost was mainly driven by the rising "incentives given to JDDJ consumers" and "referral fees paid to retailer store staff and third parties" to attract new users to the platform. Considerable investment was also directed to R&D, showing the intention to build comprehensive tech products on top of the company's commercial network. (One is Haibo.)
The operations and support expenses reached CNY 1.14 billion, compared with CNY 1.10 billion in the same quarter of 2020. The rise in rider cost stemming from the increasing intra-city delivery order volume mainly contributed to the accretion of this category; but this was partially offset by the decrease of rider-related costs incurred by the last-mile delivery business model upgrade – "effective since April 2021, the cost of riders for last-mile delivery services has been directly paid through third-party companies instead of through the company."
Even though the company experienced massive revenue growth in Q2, the spending on market expansion has kept the net profit margin at low levels. On a sequential basis, though, Dada improved its net profit margin, thanks to the efficiency gain in operations and consumer incentives.
Unit economics steadily improving
Positive dynamics in absolute figures, be it revenue or user pool growth, are never enough to claim success for a pre-profit platform economy enterprise. Dada's key business ratios, nonetheless, show some progress, too.
The trailing-twelve-months (TTM) revenue of JDDJ jumped from CNY 1.10 billion in Q4 2019 to CNY 2.97 billion in Q2 2021. In the meantime, the number of the platform's new users has been growing steadily, from 24.4 million to 51.3 million, up by 110.2%. The average revenue per user (ARPU) thereby rose from CNY 45.20 to CNY 57.90.
Using Meituan's Q2 2019 number (53.6%) as a proxy for quarter-on-quarter user retention rate (as opposed to customer churn) and the only assumption in this analysis, we found that JDDJ's user base may not only grow on the TTM basis, but the speed might have been accelerating continuously over the past eight quarters, which was perhaps caused by the platform's significant word-of-mouth marketing potential and effective referral system.
New tech, no red flags
Reporting a financially solid three-month period, Dada announced a few other updates this time. For one thing, it included an extra 1,000 stores into SaaS Haibo's network. The company is also developing an open autonomous delivery operation system, enabling on-demand retail applications for various hardware providers. The system has been tested and reportedly adopted by JD's SEVEN FRESH and Yonghui Superstores.
Both projects are narratives to keep tabs on. Those are highly likely to become key differentiators in the upcoming maturity phase of the on-demand delivery and retail market.
Over the past quarters, Dada Nexus has been growing at high double digits; good fundamentals and a balanced tactical arsenal are set to protect its market position.
For the full article with the charts, please visit the original link.
long position < we are hold it for 6 - 12 monthPlatON, initiated and driven by the LatticeX Foundation, is a next-generation Internet infrastructure protocol based on the fundamental properties of blockchain and supported by the privacy-preserving computation network. “Computing interoperability” is its core feature. By building a computing system assembled by Verifiable Computation, Secure Multi-Party Computation, Zero-Knowledge Proof, Homomorphic Encryption and other cryptographic algorithms and blockchain technology, PlatON provides a public infrastructure in open source architecture for global artificial intelligence, distributed application developers, data providers and various organizations, communities and individuals with computing needs.
China, Evergrande, and how now?Although I had expectations for China (funds) previously, I still have good expectations. BUT something fundamentally has been changing, and it is still pushing downwards in consolidation. IF at all, the Evergrande debacle appears to be a spark in the trigger.
Looks like Lehman 2.0 for thsoe who still remember...
Looks more bearish than bullish to me IMHO... 70/30 at this point.
Just keeping an eye on this!
Pinduoduo: Stellar Performance Reinforces Industry PositionChina's largest e-commerce company is transforming its development strategy.
Pinduoduo turned losses into gains in the second quarter of 2021, defending its leading position in the Chinese e-commerce area with 849.9 million annual active buyers.
Pinduoduo mainly focuses on lower-tier cities' customers and follows a 'universal social welfare' way to expand its business.
Agricultural products and reinforcing networks among farmers and customers may become the next profit points for the company.
Dazzling financial results
On August 24, 2021, Pinduoduo (PDD: NASDAQ) held it's Q2 2021 earning call, showing rather impressive financial results. Its stock surged over 20% at the beginning of that trading day.
Pinduoduo turned losses into gains for the first time in the second quarter of 2021. In Q2 2021, the company achieved revenue of CNY 23.05 billion, up 89% year-on-year. Its operating profit reached nearly CNY 2 billion (with non-GAAP operating profit of CNY 3.19 billion), compared with an operating loss of CNY 1.64 billion. In the remarkable quarter, the company received gains (net income attributable to ordinary shareholders) of CNY 2.41 billion, which is a big move compared with a net loss of CNY 0.90 billion in the same quarter of 2020. The company's basic earnings per ADS increased to USD 0.30, and diluted EPS reached USD 0.27. At the same time, its annual active buyers reached 849.9 million as of June 30, 2021, and average monthly active users (MAUs) increased to 738.5 million, accounting for 87% of its annual active buyers, defending its leading position in China's e-commerce area.
Analyzing the financials, we found that Pinduoduo's cost control contributes the most to the result. Due to increased promotion and coupon expenses, the company's sales and marketing expenses only increased 14% to CNY 10.39 billion. In comparison, general and administrative costs only increased 10% to CNY 0.43 billion, compared with the same quarter in 2020. Its operating margin and the net margin reached a historical high in the past three years, accounting for 8.7% and 17.9%, respectively. Notably, its sales and marketing expenses ratio has been cut to 45%, compared with 81% and 73% for the same quarter in 2019 and 2020, showing its consistent cost control efforts.
When dissecting its revenue structure, we found online marketing services still act as the primary resource of its revenue, which reached CNY 18.08 billion, up 64% year-on-year. According to the earnings call, this was due to the continued increase in merchant activities while merchants are exploring new ways to engage with users. Meanwhile, revenues from transaction services reached CNY 3.01 billion, surging 164% year-on-year, owing to the fulfillment and services provided in the new Duo Duo Grocery platform. As for the revenues from merchandise sales, as a temporary way to meet user demand for specific products, the income from this section was CNY 1.96 billion.
Agriculture may become the key to its future
As one of the fastest-growing e-commerce companies globally, Pinduoduo has focused on lower-tier markets' consumption demand, becoming famous for value-for-money goods. Consumers can purchase products at a lower price as a group on its merchandise platform. In this way, consumers are allowed to share feedback regarding products on their social media accounts, further amplifying the advertising influence of the company at the same time. Pinduoduo only needed two years to gain CNY 100 billion GMV (in contrast, Ali Group and JD used five and ten years, respectively). The company went public on Nasdaq in July 2018. Then in March 2021, it became China's most prominent e-commerce giant in terms of MAU.
The company is infamous for some of its products' poor quality. Even though most of them are cheap, the quality is often worse than it's desired by consumers. To resolve this issue, here are two solutions: the company could build a higher quality sub-platform, or a more 'universal-type social welfare' platform, with which it can gather profit from a broader population. Pinduoduo chose the second one. In April 2019, the company launched a critical transformation, building the Duo Duo Farms platform to help farmers in China's impoverished counties create new online sales channels. In traditional ways, farmers sell primary products to dealers, and dealers trade themselves. When customers purchase the product, the price has been increased much higher than its cost, which harms both farmers and customers. Then, when PDD becomes the mediator, it connects farmers directly with consumers across the country and applies customer-to-manufactory (C2M) to help them build their brands, forming a win-win situation. By the end of 2020, the platform has helped over 1.13 million farmers to sell over 2.06 million tons of agricultural produce.
We think Pinduoduo's transformation had a positive impact on its business operations. Before 2020, Pinduoduo had adopted a low-cost publicity model to convert the advertising fees payable to the media into rewards for users who introduce new customers. However, at this stage, we believe that since user numbers are gradually approaching the ceiling (as over half of the people in China are Pinduoduo's users), the model of wildly attracting new customers may no longer be suitable for the company and is difficult to bring profit growth. Facts have also confirmed our idea that the growth rate of the company's MAUs has been gradually slowing down since 2019. So Pinduoduo turned its developing direction to retain its users and add more value instead of attracting more users. Focusing on China's most prominent supply side is a good strategy – after all, it is a blue ocean with few competitions.
Hence, we are optimistic about the long-term development of Pinduoduo and believe that its agricultural focus might generate new opportunities.
Valuation and bottom line
We used EV/revenue and P/B ratio to value the company. Considering that the company has been able to turn losses into profits and its competitors have much lower ratios, we decided to use the adjusted historical average method. From the chart, it is obvious that the ratio is at a low level, which we think is mainly caused by the regulation changes in China recently. Based on its current financial performance, momentum, and competitive landscape, we calculated that 13.5x EV/revenue and 17.5x P/BV is an appropriate valuation for Pinduoduo in 12 months, which corresponds to a target price of USD 141.52.
Key risks
1. Pinduoduo's largest risk comes from possible conflicts with registered merchants. The company provides a favorable discount at the expense of downtrodden platform merchants. Besides, the merchants are the primary resources that benefit most of Pinduoduo's promotion activities. Small-scale merchants find it difficult to survive on this platform. In the long run, we think it will lead to the weakness of the supply side and harm the whole platform.
2. Another risk is that the problem of low-quality products still exists. Since the Pinduoduo platform has more razor-thin margins than other platforms, many merchants chose to sell defective goods in Pinduoduo while selling better goods on Tmall and JD.com. We think it is not conducive to the original impression transformation of the company in the long term.
For the full article with the charts, please visit the original link.
XPeng Launches P5 Sedan with Starting Price around USD 24,500The company has secured a supply partnership with SK Innovation (SKI), a South Korean power battery supplier, which will provide it with high nickel-based Li-ion batteries with 80% nickel content.
After two months of pre-sales, XPeng Motors' new sedan, the P5, officially went on sale on September 15 at prices several thousand CNY lower than the pre-sale prices.
XPeng announced at a press conference on Wednesday that the P5 is immediately available for order in China in six configurations with a subsidized price range of CNY 157,900 (USD 24,500) to CNY 223,900, and deliveries will begin in late October.
The exact post-subsidy pricing for these models is as follows:
600P CNY 223,900
550P CNY 199,900
550E CNY 192,900
460E CNY 177,900
550G CNY 172,900
460G CNY 157,900
For comparison, XPeng's flagship sedan, the P7, has a starting price of CNY 229,900. The P5 went on pre-sale on July 17 with a price range of CNY 160,000 (USD 24,700) to CNY 230,000.
XPeng debuted a new naming scheme on the P5 model, with P representing the model's highest level of intelligence, followed by E and G. The numbers in the names of the different models represent their NEDC range.
The P series with the highest intelligence level offers 550 km and 600 km NEDC range options, while the E series and G series both offer 460 km and 550 km range options.
The battery for the 460 km range model is a lithium iron phosphate battery, while the 550 km and 600 km versions are ternary lithium batteries.
XPeng previously boasted that the P5 is the world's first LiDAR-equipped model, but it is worth noting that only the P Series is equipped with this component, while the E Series and G Series models are not equipped with LiDAR.
In terms of intelligent configuration, the P series comes with XPILOT 3.5 driver assistance system, the E series comes with XPILOT 3.0, while the G series does not offer this system.
The XPILOT 3.5 enables the extension of NGP (Navigation Guided Pilot) from highways to city roads.
The standard price of XPILOT 3.5 is CNY 45,000, and subscribers will be able to enjoy a limited-time discounted price of CNY 25,000 if they subscribe before delivery. The standard price for XPILOT 3.0 is CNY 36,000 and 20,000 if users subscribe before delivery.
The urban NGP will allow high precision navigation and assisted driving, adapted to China's challenging urban road conditions.
NGP will also be upgraded to NGP-L - a highway NGP with LiDAR - to enable safer and more capable assisted driving on China's highways and expressways, the company said.
XPeng's existing ACC and LCC systems will also be upgraded and enhanced to ACC-L and LCC-L status in P5, which incorporates LiDAR to enable P5 to identify congested vehicles earlier and stationary vehicles more accurately.
"With the P5, we have delivered a new level in sophistication and technological advancement for smart EVs in China, at a competitive price point," said He Xiaopeng, Chairman and CEO of XPeng.
"We believe this is an age of intelligence, and that intelligence will redefine mobility as a whole. Now we have made the best-in-class smart family sedan available at the CNY 200,000 price range, bringing some of the most advanced driver assistance functionality to China's vast and fast-growing middle-class consumer base," He said.
"We have drawn inspiration from customers' feedback, especially during the pandemic, and from the best models in the conventional family sedan and recreational vehicle (RV) class, while taking functionality and features to a whole new level," He added.
This article was first published by Phate Zhang on CnEVPost, a website focusing on new energy vehicle news from China.