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China Evergrande shares hit new low amid debt crisis; Kaisa misses pay date

The logo of China Evergrande Group is seen on the property developer’s headquarters in Shenzhen, Guangdong province, China, Sept. 26, 2021. REUTERS/Aly Song/File Photo

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  • Hopes of debt restructuring keep floor under Evergrande shares
  • Evergrande has not yet confirmed default
  • ‘Market will want to wait and see and not give up yet’ -analyst
  • Trading in shares of Kaisa suspended

HONG KONG, Dec 8 (Reuters) – China Evergrande Group’s shares hit a record low on Wednesday after a missed debt payment deadline put the developer at risk of becoming the country’s biggest defaulter, even as hopes of a managed debt restructuring calmed fears of a messy collapse.

So far, any Evergrande (3333.HK) fallout has been broadly contained, and with policymakers becoming more vocal and markets more familiar with the issue, consequences of its troubles are less likely to be widely felt, market watchers have said.

Failure by Evergrande to make $82.5 million in interest payments due Nov. 6 on some U.S. dollar bonds would trigger cross-default on its roughly $19 billion of international bonds, with possible ramifications on China’s economy and beyond.

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While the 30-day grace period is over, Evergrande has not announced if the bonds have formally defaulted.

The developer did not immediately respond to a Reuters request for comment.

“Without the official announcement, the market will want to wait and see and not give up yet; otherwise Evergrande’s share and bond prices should have tumbled a lot more,” said Steven Leung, director of UOB Kay Hian in Hong Kong.

“The market also wants to wait and see what can be done with local government stepping in now,” Leung added, referring to the move by Evergrande’s home province to help contain the risk.

Evergrande was once China’s top property developer, with more than 1,300 real estate projects. With $300 billion of liabilities, it is now at the heart of a property crisis in China this year that has crushed almost a dozen smaller firms.

Trading in shares of embattled smaller peer Kaisa Group Holdings (1638.HK) was suspended on Wednesday, after a source with direct knowledge of the matter said it was unlikely to meet its $400 million offshore debt deadline on Tuesday. read more

Kaisa, China’s largest holder of offshore debt among developers after Evergrande, had not repaid the 6.5% bond by the end of Asia business hours, the person said, which could push the notes into technical default, triggering cross defaults on its offshore bonds totalling nearly $12 billion.

Kaisa declined to comment.

Bondholders owning over 50% of the notes in question sent the company draft terms of forbearance late on Monday, a source previously told Reuters.

Even in the case of a technical default, Kaisa and offshore bondholders would continue the discussions, two sources with knowledge of the matter said.

SHARES HIT RECORD LOW

Evergrande’s shares, which have given up more than 20% this month, were down 6% in the afternoon at HK$1.72 – lowest since their November 2009 debut. The broader market (.HSI) was steady.

Its notes due last month , one of two tranches with a coupon payment deadline that passed on Monday, traded at 18.613 cents on the dollar, Duration Finance data showed, versus 18.875 from the close of Tuesday Asia hours.

Kaisa’s bond due April 2022 traded at 36.397, little changed from the day earlier but down from 37.89 last week.

The government has repeatedly said Evergrande’s problems can be contained and moves to boost liquidity in the banking sector along with the firm’s plans to forge ahead with a restructuring of its overseas debt have helped reassure global investors.

The provincial government of Guandong, where Evergrande is based, stepped in last week to help manage the fallout, reinforcing the view that its failure would be managed.

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Reporting by Anne Marie Roantree and Donny Kwok; Editing by Himani Sarkar

Our Standards: The Thomson Reuters Trust Principles.

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Evergrande debt deadline passes with no sign of payment -sources

The company logo is seen on the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song/File Photo

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HONG KONG/SHANGHAI, Dec 7 (Reuters) – Some offshore bondholders of China Evergrande Group (3333.HK) did not receive coupon payments by the end of a 30-day grace period, four people with knowledge of the matter said, pushing the cash-strapped property developer closer to formal default.

Failure to make $82.5 million in interest payments that were due last month would trigger cross-default on the firm’s roughly $19 billion of international bonds and put the developer at risk of becoming China’s biggest-ever defaulter – a possibility that has loomed over the world’s second-largest economy for months.

Once China’s top property developer, with over 1,300 real estate projects and $300 billion of liabilities, Evergrande has been the poster child of a property crisis in China this year that has already ripped down nearly a dozen smaller developers.

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The government has repeatedly said Evergrande’s problems can be contained and moves to boost liquidity in the banking sector along with the firm’s plans to forge ahead with a restructuring of its overseas debt have helped reassure global investors.

“The market already had certain expectations about this (non-payment)”, said strategist Kenny Ng at Everbright Sun Hung Kai Securities. It “just waited to see when this will happen”.

“At the same time, investors are watching the development of Evergrande, including whether it is heading for debt restructuring or its creditor repayment plan,” Ng said.

On Monday, the developer said it had established a risk-management committee that included officials from state entities to assist in “mitigating and eliminating the future risks”. read more

That came after it earlier said creditors had demanded $260 million and that it could not guarantee funds to repay debt. That prompted authorities to summon its chairman and reassure markets that broader risk could be contained. read more

So far, any Evergrande fallout had been broadly contained in China and with policymakers becoming more vocal and markets more familiar with the issue, consequences of Evergrande’s troubles are less likely to be widely felt, market watchers have said. read more

State involvement and hope of managed debt restructuring helped lift Evergrande stock as much as 8.3% a day after diving 20% to a record closing low. Still, it ended Tuesday up only 1.1% while its bonds continued to trade at distressed levels.

Notes due Nov. 6, 2022, – one of two tranches with a coupon payment deadline that passed Monday midnight in New York – traded at 18.282 cents on the dollar, Duration Finance data showed, little changed from a day earlier.

SELL OFF

Founded in 1996, Evergrande epitomised a freewheeling era of borrowing and building. That business model was scuttled, however, by hundreds of new rules designed to curb developers’ debt frenzy and promote affordable housing.

Evergrande became just one of a number of developers subsequently starved of liquidity, prompting offshore debt default and credit-rating downgrades, and a plunge in the value of developers’ stocks and bonds.

Smaller peer Kaisa Group Holdings Ltd (1638.HK) – China’s largest offshore debtor among developers after Evergrande – also risks defaulting on a $400 million bond maturing on Tuesday having failed to make a deal with bondholders.

To avoid an overall default, bondholders owning over 50% of the 6.5% notes due Dec. 7 sent Kaisa draft terms of forbearance late on Monday to work toward a solution, a person with direct knowledge of the matter old Reuters. Kaisa started discussing forbearance with bondholders last week, the person said.

Another person with direct knowledge said discussions are at preliminary stages and that it will take time to finalise terms.

The people declined to be identified as the information was confidential.

Responding to Reuters’ request for comment, Kaisa said it is open to discussion on forbearance, without elaborating.

Sources previously told Reuters that the bondholders, had offered Kaisa $2 billion in funding last month but that no major progress on the offer was made. read more

Shares of Kaisa – the first Chinese developer to default on an offshore bond in 2015 – rose 1.1% on Tuesday.

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Reporting by Clare Jim and Scott Murdoch in Hong Kong and Andrew Galbraith in Shanghai; Editing by Sumeet Chatterjee and Christopher Cushing

Our Standards: The Thomson Reuters Trust Principles.

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Senate GOP rejects debt limit fix on must-pass defense bill

“I think that sets a bad precedent,” Ernst said. “It might be able to pass, but it’s something we all need to talk about, and I just don’t think we should be operating like this.”

The debt-on-defense-bill gambit comes as Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell have been quietly negotiating a path forward to suspend the borrowing limit and avoid a catastrophic government default. The Treasury Department currently predicts the federal government will hit its current debt ceiling on Dec. 15. The Bipartisan Policy Center’s most recent estimate projects the so-called “X date” for default will fall between Dec. 21 and Jan. 28, 2022.

Many Republicans argue that attaching the debt limit to the annual defense policy bill would force them to take an unreasonably tough vote, given widespread GOP support for the defense bill and strong opposition in their party to complying with a suspension of the debt limit.

Democrats have privately suggested that McConnell is open to attaching the debt limit onto the defense policy bill, and the top Republican on the Senate Armed Services Committee suggested Monday night that he would still vote yes on the combined vehicle: “What I don’t want to do — is for anything to happen to our NDAA that would negatively impact it,” Oklahoma’s Jim Inhofe told reporters.

Still, multiple others in the GOP are ice-cold to the prospect.

“It would be misinterpreted that Republican support for the [defense policy bill] would also include” supporting a hike in the debt limit, said Sen. John Cornyn (R-Texas), a top McConnell consigliere. “That’s why I think the message could be muddled. I don’t like the idea.”

Senate Republicans have long insisted that if Democrats want to suspend the debt limit they must do so on their own, a protest against the price tag of the majority party’s forthcoming social spending bill. Democrats counter that suspending the debt limit along party lines would set a problematic precedent and note that a significant amount of the debt that’s causing the current problem was incurred under the Trump administration.

House leaders are currently weighing three options for moving forward on the defense policy bill and the debt limit, according to a senior Democratic aide. The first option would separate the two pieces of legislation — anchored by House Democrats’ passage of a stand-alone bill that would allow the Senate to fast-track a debt ceiling hike on its side of the building.

The second and third options would ultimately move the two bills as a single piece of legislation. In any of those three scenarios, the legislation would likely need at least 10 GOP votes to advance, an outcome that appears unlikely for the second and third options.

The tone between McConnell and Schumer in the lead-up to the next borrowing deadline has significantly improved compared to the fall, however. McConnell provided the 11 GOP votes necessary in October to allow Democrats to suspend the debt limit for two months. He’s continued to insist that Democrats should use the time-consuming budget reconciliation process to raise the debt limit while steering around a GOP filibuster, but he’s also kept the lines of communication open with Schumer.

The debt limit came up briefly during this week’s Senate GOP leadership meeting, and McConnell indicated he was still speaking to Schumer, according to an attendee who spoke candidly on condition of anonymity.

Sen. James Lankford (R-Okla.) described including the debt limit in the defense policy bill as a “terrible idea” and predicted it would fail to get the needed support from 10 Republicans to move forward.

“We’ve been pretty clear that we’re not actually going to be a part of actually helping them with adding trillions of additional debt that we had no part of,” Lankford said Monday. “That’s been a pretty clear statement from the beginning on this, and it should continue to be that.”

Even as the path forward on the debt limit remains unclear, both parties’ leaders have emphasized that they will not let the government default.

Senate Armed Services Chair Jack Reed (D-R.I.), asked if he favored attaching the debt fix to the defense bill he shepherds through Congress, took a long pause before saying that “if it’s the way to get the debt ceiling passed, absolutely. We’ve got to get the debt ceiling raised.”

Sen. Joe Manchin (D-W.Va.), said he would need to review any proposal to include the debt limit in the defense policy bill, but noted that it “probably has to be” addressed before Democrats’ social spending bill — which is currently slated to hit the Senate floor as soon as next week.

“The debt ceiling is something we can’t play games with,” Manchin said. “And you’ve got to get that done. You’ve got to pay.”

Andrew Desiderio, Heather Caygle and Caitlin Emma contributed to this report.

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China Evergrande braces for debt deadline after doubting ability to pay

  • Evergrande says no guarantee it can make $82.5 mln debt payments
  • Says creditors have also demanded $260 mln repayment
  • Authorities summon chairman; shares drop 15% to 11-year low
  • Any collapse could ripple through property sector and beyond

HONG KONG, Dec 6 (Reuters) – After lurching from deadline to deadline, China Evergrande Group (3333.HK) is again on the brink of default, with pessimistic comments from the property developer raising expectations of direct state involvement and a managed debt restructuring.

Having made three 11th-hour coupon payments in the past two months, Evergrande will again face the end of a 30-day grace period on Monday, with dues this time at $82.5 million.

But a statement late on Friday saying creditors had demanded $260 million and that it could not guarantee enough funds for coupon repayment prompted authorities to summon its chairman – and wiped over a sixth off its stock’s market value on Monday.

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Evergrande was once China’s top-selling developer but is now grappling with more than $300 billion in liabilities, meaning a collapse could ripple through the property sector and beyond.

Its statement on Friday was followed by one from authorities in its home province of Guangdong, saying they would send a team to Evergrande at the developer’s request to oversee risk management, strengthen internal control and maintain operations.

The central bank, banking and insurance regulator and securities regulator also released statements, saying risk to the broader property sector could be contained.

Short-term risk from a single real estate firm will not undermine market funding in the medium or long term, said the People’s Bank of China. Housing sales, land purchases and financing “have already returned to normal in China”, it said.

Analysts said authorities’ concerted effort signalled Evergrande has likely already entered a managed debt-asset restructuring process to reduce systemic risk.

Morgan Stanley in a report said such a process would involve coordination between authorities to maintain normal operation of property projects, and negotiation with onshore creditors to ensure financing for projects’ development and completion.

Regulators would also likely facilitate debt restructuring discussion with offshore creditors after business operations start to stabilise, the U.S. investment bank said.

After the flurry of statements, Evergrande’s stock slid as much as 15% on Monday to HK$1.92 – its lowest since May 2010.

Its November 2022 bond – one of two bonds that could go into default on non-payment on Monday – was trading at the distressed price of 20.787 U.S. cents on the dollar, compared with 20.083 cents at the end of Friday.

LIQUIDITY SQUEEZE

Evergrande has been struggling to raise capital by disposing of assets, and the government has asked Chairman Hui Ka Yan to use his wealth to repay company debt. read more

The firm is just one of a number of developers facing an unprecedented liquidity squeeze due to regulatory curbs on borrowing, causing a string of offshore debt defaults, credit-rating downgrades and sell-offs in developers’ shares and bonds.

To prevent further turmoil, regulators since October have urged banks to relax lending for developers’ normal financing needs and allowed more real estate firms to sell domestic bonds. read more

To free up funds at banks, Premier Li Keqiang on Friday said China will cut the bank reserve requirement ratio (RRR) “in a timely way” to increase support for the real economy. read more

Still, the government may have to significantly step up policy-easing measures in the spring to prevent a sharp downturn in the property sector, Japanese investment bank Nomura said in a report published on Sunday.

CONTAGION

Smaller developer Sunshine 100 China Holdings Ltd (2608.HK) on Monday said it had defaulted on a $170 million U.S. dollar bond due Dec. 5 “owing to liquidity issues arising from the adverse impact of a number of factors including the macroeconomic environment and the real estate industry”. read more

The delinquency will trigger cross-default provisions under certain other debt instruments, the developer said.

Its shares fell nearly 3%.

Last week, Kaisa Group Holdings Ltd (1638.HK) – the largest offshore debtor among Chinese developers after Evergrande – said it had failed to secure approval from offshore bondholders to carry out an exchange offer of its 6.5% offshore bonds due Dec. 7 , without which it said it would risk default.

The developer has begun talks with some of the offshore bondholders to extend the deadline for the $400 million debt repayment, sources have told Reuters. read more

Smaller rival China Aoyuan Property Group Ltd (3883.HK) last week also said creditors have demanded repayment of $651.2 million due to a slew of credit-rating downgrades, and that it may be unable to pay due to a lack of liquidity. read more

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Reporting by Clare Jim in Hong Kong; Additional reporting to Shuyan Wang in Beijing; Editing by Anne Marie Roantree and Christopher Cushing

Our Standards: The Thomson Reuters Trust Principles.

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Evergrande Debt Restructuring Looms After Months of Turmoil

(Bloomberg) — China Evergrande Group’s long-awaited debt restructuring may finally be at hand, posing a fresh test for Xi Jinping’s government as it tries to rein in the country’s financial excesses without derailing economic growth.

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The embattled developer said in an exchange filing late Friday that it plans to “actively engage” with offshore creditors on a restructuring plan, offering its most explicit acknowledgment yet that its $300 billion of overseas and local liabilities have become unsustainable.

A barrage of statements from Chinese regulators — several of which landed just minutes after Evergrande’s announcement — suggested authorities are striving to contain the fallout on homeowners, the financial system and the broader economy rather than orchestrate a bailout.

The government of Guangdong, the southern province where Evergrande is based, summoned founder Hui Ka Yan to express concern over the company’s announcement and said it would dispatch a team to the developer to ensure “normal” operations. The People’s Bank of China blamed Evergrande’s problems on the company’s “own poor management” and “reckless expansion.”

The flurry of activity follows several weeks of relative calm for Evergrande, which has been making last-minute payments on its dollar notes since late October at the urging of Beijing. Friday’s statements signal the world’s most indebted developer may struggle to make further payments within their grace periods, even after a spate of personal asset sales by Hui that appeared designed to help Evergrande meet its near-term debt obligations.

The company’s next test comes Monday. That’s when a 30-day grace period ends on two dollar bond interest payments that were initially due Nov. 6: a $41.9 million coupon for a note maturing in 2022 and $40.6 million of interest on a security due the following year. Both bonds were issued by unit Scenery Journey Ltd.

The question for global markets is whether Beijing can coordinate a restructuring without upending the broader real estate sector, which accounts for nearly a quarter of economic output. Policy makers have a history of abandoning efforts to rein in developers when the risks to growth mount, though Xi appears more determined than his predecessors to stamp out the moral hazard that allowed companies like Evergrande to expand so rapidly.

One risk is that Beijing may not have a full picture of how indebted Evergrande and its peers have become. The Shenzhen-based developer indicated in its exchange filing on Friday that it may not be able to fulfill its pledge to guarantee payment on a $260 million note issued by joint venture Jumbo Fortune Enterprises, an obligation that many Evergrande investors didn’t even know existed until a few months ago.

While it will be important to monitor how Evergrande’s restructuring progresses, the odds of renewed panic in Chinese credit markets are low, according to analysts at China International Capital Corp., one of the nation’s largest investment banks. Real estate companies with poor management and high financial risks will be “phased out,” but authorities are likely to ensure that higher-quality developers retain access to funding, CICC analysts Yan Xu and Eric Yu Zhang wrote in a report.

China is likely to ease restrictions on the real estate sector this month and into the first quarter of 2022, according to analysts at Jefferies Financial Group Inc. Regulators on Friday signaled that they would expand mortgage support beyond first-time homebuyers, guide banks to provide loans to developers for acquisitions and further open funding channels including the asset-backed securities market, the analysts wrote. A reduction in banks’ reserve requirements is likely in the next few weeks after Premier Li Keqiang said on Friday a cut would come at the “proper time,” the analysts wrote.

Bond investors have been anticipating an Evergrande restructuring for months, with the company’s 2025 dollar notes trading below 30 cents since the end of September. An index of Chinese junk bonds slid for a third day on Friday, lifting the yields to 22%, though gains in investment-grade notes suggested bondholders have become more relaxed about the prospect of contagion than they were earlier this year.

Investors are increasingly differentiating between the weakest and strongest borrowers after China’s government took steps to mitigate the cash crunch for higher-rated developers in recent weeks. Apart from Evergrande, money managers are bracing for a potential default by Kaisa Group Holdings Ltd., which faces a $400 million bond maturity on Tuesday after failing to swap the notes for new ones due 18 months later. Smaller Chinese developer Sunshine 100 China Holdings Ltd. defaulted on $179 million of debt and interest payments due Sunday.

For Evergrande, the next step may be to enter into an informal debt standstill as it continues to try to negotiate with creditors, according to Bloomberg Intelligence analyst Daniel Fan.

“Extension of maturities, based on sustainability of debt, would be likely,” he said. “One option to sweeten the process is to link some of the repayment to its offshore assets,” such as its Hong Kong-listed electric vehicle unit, Fan added.

Evergrande’s offshore creditors are widely expected to fall near the bottom of the priority list in a restructuring, behind nearly 1.6 million homeowners who gave the developer down payments on properties, local suppliers, Evergrande employees, and individual investors who bought wealth management and trust products tied to the company. Several Evergrande-linked WMPs and trusts have already defaulted, restructured or fallen behind on payments.

(Updates with analyst comments and Sunshine 100 default from 10th paragraph.)

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‘A perfect storm’ as bitcoin stages weekend crash that puts it on verge of ‘breakdown.’ Here’s what crypto bulls are saying.

A downturn in global stocks appears to be spilling over into the nascent crypto market, with a bout of weekend selling erupting into a mini-flash crash in prices of bitcoin and other notable digital assets.

At last check Saturday afternoon New York time, bitcoin
BTCUSD,
-21.43%
was changing hands at $48,186.96 on CoinDesk, down 12% over the past 24 hours, but the overnight descent, in the early hours of Saturday morning, had been even more harrowing. Bitcoin’s slump to around $42,000 on some exchanges meant that it had tumbled nearly 30% peak to trough on a 24-hour basis.

NYDIG, a technology and financial services firm dedicated to Bitcoin, said that the decline was even more severe for some offshore platforms such as Huobi, where bitcoin briefly touched a 24-hour nadir at $28,800.

That is a gut-wrenching fall, that may even leave some veteran crypto bulls feeling a touch queasy.

The drop also meant that the total market value of the crypto universe, as tracked by CoinMarketCap.com, shed nearly $400 billion to around $2 trillion, before recovering to around $2.2 trillion.


Source: CoinMarketCap.com

So what precipitated the drop? It isn’t 100% clear.

The analysts at CoinDesk blamed at least some of the downturn on trading in crypto derivatives, amplified by growing concerns about the prospects for tighter financial conditions that is forcing a repricing of assets that are sensitive to potentially rising borrowing costs.

“The decline was likely in part technically-driven, exacerbated by the derivatives market, and not helped by the downside momentum behind high-growth stocks on Friday, to which bitcoin has been positively correlated,” wrote Katie Stockton of Fairlead Strategies, in a Saturday morning note.

NYDIG estimates that $1.1 billion of leveraged bitcoin positions and $2.5 billion of crypto leveraged positions (including bitcoin) have been liquidated in the past 24 hours, representing the largest such notional liquidation since Sept. 7.

Bitcoin ‘s values have been softening for weeks but declines for other risky assets have been accelerating with the Federal Reserve indicating it might increase the pace at which it is withdrawing the market support provided in the past 18 months during the coronavirus pandemic as it turns its attention to restraining inflation. This so-called “tapering” of bond purchases has investors believing that interest-rates hikes are next on the central bank’s agenda in 2022.

Some believe that bitcoin and other digital assets aren’t correlated with the prices of other assets, which has been heralded as one of the more appealing features of bitcoin and its ilk. However, crypto has been trading more in step with traditional stocks and bonds recently partly because of the prevailing low interest-rate environment and if that changes then the values of a host of assets, also factoring in inflation, must be reassessed.

Put another way, the value of an asset is its future income, discounted to the present using interest rates, plus a “risk premium”—the extra return you expect for owning something riskier than a government bond. A rising interest rate diminishes the present value of that future income.

In traditional markets, that repricing has seen technology shares underperform as they are the most sensitive to shifts in rates. The tech-laden Nasdaq Composite Index
COMP,
-1.92%
stands 6% from its Nov. 19 peak, with declines gathering steam over the past week, amid fears about the economic impact of the coronavirus omicron variant and concerns about the Fed’s monetary policy plans.

Meanwhile, the Dow Jones Industrial Average
DJIA,
-0.17%,
is half way toward a correction, and is off more than 5% from its Nov. 8 record close, and the S&P 500 index
SPX,
-0.84%
is 3.5% from its all-time high close put in on Nov. 18, while the small-capitalization Russell 2000 index fell into correction, commonly defined as a fall of at least 10% from a recent peak, on Thursday.

On Twitter, Michael Novogratz, founder and Chief Executive of crypto firm Galaxy Digital, tweeted that the backdrop in markets was a “perfect storm,” perhaps referring to the tumble in broader markets, omicron fears and hawkish comments from the Federal Reserve.

Fairlead’s Stockton says that if the downturn persists, after bitcoin broke through an area of support at around $53,000, it would qualify as a more troubling technical breakdown of the uptrend in the asset’s price.

“ Momentum has weakened to the extent that there is a pending weekly MACD ‘sell’ signal that would be solidified upon a confirmed breakdown tomorrow, she wrote, referring to the Moving Average Convergence/Divergence, used by technical analysts as a gauge of momentum in an asset.  

However, NYDIG suggested that they are seeing positive trends for bitcoin and crypto: “On our desk, we have seen two-way flows today with 84% of the flows being buys on our trading desk excluding tax loss harvesting trades,” the company wrote in a note on Saturday. 

In other crypto, Ether
ETHUSD,
-16.54%
on the Ethereum blockchain was trading down 6% but holding above $4,000 at 4,050.85, at last check Saturday afternoon. It had been as low as around $3,500 overnight.

To be sure, crypto is one of the more volatile assets and is still in the phase of gaining credibility as a bona fide alternative asset.

Some crypto bulls, known for holding the investment long-term despite its tendency for wild swings, were making light of the Saturday slump such as this tweet from the Twitter account associated with Billy Markus, one of the founders of dogecoin
DOGEUSD,
-33.22%,
which has become such a popular meme asset that it has been duplicated by other tokens such as Shiba Inu
SHIBUSD,
.

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China’s Guangdong summons Evergrande boss after debt repayment warning

The company logo is seen on the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song

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  • Evergrande says may not have enough funds to meet obligations
  • China central bank, regulators step in to try to reassure market

BEIJING, Dec 3 (Reuters) – China’s Guangdong province on Friday summoned the chairman of China Evergrande Group (3333.HK) after the real estate developer said there was “no guarantee” it would have enough funds to meet debt repayments, while regulators sought to reassure markets.

Evergrande, once China’s top-selling developer, is grappling with more than $300 billion in liabilities, fuelling fears of a potential collapse that could send shockwaves through the country’s property sector and beyond.

On Friday, the company said in a filing to the Hong Kong stock exchange it had received a demand from creditors to pay about $260 million. It is already late paying $82.5 million in coupons due on Nov. 6. read more

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“In light of the current liquidity status … there is no guarantee that the group will have sufficient funds to continue to perform its financial obligations,” Evergrande said, adding that creditors may demand accelerated repayment if it does not.

That prompted the government of Guangdong, where the company is based, to summon Evergrande Chairman Hui Ka Yan.

The provincial government said in a statement it would – at Evergrande’s request – send a working group to the company to oversee risk management, strengthen internal controls and maintain normal operations.

The Guangdong authorities were not the only government entity to wade into the Evergrande issue on Friday.

In a series of apparently coordinated statements late in the evening, China’s central bank, banking and insurance regulator and its securities regulator sought to reassure the market that any risks to the broader property sector could be contained.

“Evergrande’s problem was mainly caused by its own mismanagement and break-neck expansion,” the People’s Bank of China said.

Short-term risks caused by a single real estate firm will not undermine market fundraising in the medium and long term, it said, adding that housing sales, land purchases and financing “have already returned to normal in China.”

The China Banking and Insurance Regulatory Commission (CBIRC) said the Evergrande issue would not affect the industry’s normal operations and it would increase support for guaranteed rental housing.

It added that it believed domestic and overseas regulators would deal with Evergrande-related issues fairly, while the China Securities Regulatory Commission (CSRC) said any fallout for the capital market was “controllable” and it would maintain support for property developers’ funding needs.

In its filing, Evergrande said it intended to actively engage with creditors to come up with a “viable restructuring plan” to deal with its offshore debts.

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Reporting by Beijing Newswroom and Arundhati Dutta in Bengaluru; additonal reporting by Sumeet Chatterjee in Hong Kong; Writing by Tom Daly; Editing by Sriraj Kalluvila, Louise Heavens and Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Trust Principles.

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Investors await Evergrande’s overdue $148 mln payment as debt woes grow

A man rides an electric bicycle past the construction site of Guangzhou Evergrande Soccer Stadium, a new stadium for Guangzhou FC developed by China Evergrande Group, in Guangzhou, Guangdong province, China September 26, 2021. REUTERS/Aly Song/File Photo

  • Evergrande due to pay $148 mln bond coupon on Wednesday
  • Shares of developer Fantasia plunge 50% after missing payment
  • S&P downgrades Shimao Group to “BB+” from “BBB-“

SHANGHAI/HONG KONG, Nov 10 (Reuters) – Cash-strapped China Evergrande Group (3333.HK) faced a Wednesday deadline for making an offshore bond payment, while a credit rating downgrade on another property firm added to mounting concerns about a liquidity squeeze in the sector.

Evergrande, the world’s most indebted developer, has been stumbling from deadline to deadline in recent weeks as it grapples with more than $300 billion in liabilities, $19 billion of which are international market bonds.

The company has not defaulted on any of its offshore debt obligations, but another overdue $148 million bond payment must be made on Wednesday. There was no word on that payment as of early afternoon Asia time.

The developer, which also has coupon payments totalling more than $255 million on its June 2023 and 2025 bonds on Dec. 28, declined to comment when contacted by Reuters about its Wednesday payment deadline. read more

China’s property woes rattled global markets in September and October. There was a brief lull in mid-October after Beijing tried to reassure markets the crisis would not be allowed to spiral out of control. read more

But concerns have resurfaced, with the U.S. Federal Reserve warning on Tuesday that China’s troubled property sector could pose global risks.

More developers are seeing their credit ratings slashed on their worsening financial profiles.

S&P Global Ratings said on Wednesday it had downgraded property developer Shimao Group Holdings’ (0813.HK) rating to “BB+” from “BBB-” over concerns that tough business conditions would hinder the company’s efforts to reduce debts.

S&P considers a rating under “BBB-” to be speculative grade.

Worries over the potential fallout from Evergrande have also roiled China’s property sector in recent days, slamming the bonds of real estate companies amid worries the crisis could spread to other markets and sectors.

Shares of developer Fantasia Holdings (1777.HK) plunged 50% on Wednesday after it said there is no guarantee it will be able to meet its other financial obligations following a missed payment of $205.7 million that was due Oct. 4.

FINANCING OPTIONS

Underlining the liquidity squeeze, some real estate firms disclosed plans to issue debt in the inter-bank market at a meeting with China’s inter-bank bond market regulator, the Securities Times reported on Wednesday. read more

In the near future, real estate companies will issue bonds in the open market for financing, while banks and other institutional investors will assist via bond investment, said the paper.

Debt-laden developers including Evergrande and peer Kaisa Group (1638.HK) have also been looking to raise cash to repay their many creditors by selling some of their property and other business assets.

Beijing has been prodding government-owned firms and state-backed property developers to purchase some of Evergrande’s assets to try to control the fall. read more

Rising concerns about the developers’ woes spreading to other sectors was visible on Wednesday as the spread, or risk premium, between lower risk, investment grade Chinese firms and U.S. Treasuries widened to a more than five-month high. (.MERACCG)

Despite the debt woes of Evergrande, its electric vehicles (EV) unit is pushing ahead with its business plan. The unit is seeking Chinese regulatory approval to sell its inaugural Hengchi 5 sport-utility vehicles. read more

China Evergrande New Energy Vehicle Group Ltd (0708.HK) plans to sell HK$500 million ($64 million) worth of shares to fund production of new energy cars.

Shares in Evergrande were little changed from previous close on Wednesday afternoon, while the EV unit was up 2.2%.

Founded in Guangzhou in 1996, Evergrande epitomised a freewheeling era of borrowing and building. But that business model has been scuttled by hundreds of new rules designed to curb developers’ debt frenzy and promote affordable housing.

Any prospect of Evergrande’s demise raises questions over more than 1,300 real estate projects it has in some 280 cities.

Reporting by Andrew Galbraith in Shanghai and Clare Jim in Hong Kong; Writing by Sumeet Chatterjee and Ira Iosebashvili; Editing by Stephen Coates and Lincoln Feast.

Our Standards: The Thomson Reuters Trust Principles.

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How much holiday shoppers plan to spend, and how they can avoid debt

Pedestrians carrying shopping bags wait to cross a street in the SoHo neighborhood of New York on Oct. 24, 2021.

Bloomberg | Bloomberg | Getty Images

Most Americans say they don’t intend to spend more than last year this holiday season – yet that doesn’t mean they won’t go into debt.

A survey from CreditCards.com finds the average parent with kids under 18 plans to spend $276 per child on gifts. Meanwhile, the average holiday celebrant with a significant other may spend $251 on gifts for them.

A lot of holiday shoppers aren’t planning on increasing their budgets for this holiday season compared to last year. The survey found that 48% of respondents intend to spend about the same. Meanwhile, 21% said they intend to spend less and 13% said they anticipate spending more. The remaining 9% said they weren’t sure yet.

Those who plan to pare back will start with decorations, followed by entertaining and hosting, gifts and travel, in that order.

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However, despite a desire to keep their spending in check, 41% of respondents indicated they are willing to incur debt this holiday season. That was even higher for those who already have credit card debt, with 60% saying they would be willing to add to their balances.

Ted Rossman, senior industry analyst at CreditCards.com, said there are risks people could still overdo it this year.

“Retail sales are setting records, even in the face of some rather downbeat consumer confidence data,” Rossman said.

Even as many consumers pared back their credit card balances during the pandemic, data from Experian shows the average balance is $5,525, he said. Moreover, more than half of active credit card accounts carry their balances from month to month. And the average credit card interest rate is more than 16%.

This year, inflation could lead to people having less money to spend on other things, which could mean they add to those balances. Meanwhile, the enthusiasm for this year’s holiday season coming out of the pandemic could also inspire people to spend more, Rossman said.

There are some tips to avoid that.

First, even though it may sound early, start holiday shopping now, Rossman advised. Due to supply chain issues, some items may be harder to find this year.

“The longer you wait, the more likely things are going to run out, and I don’t think prices are going to go down,” Rossman said.

Next, set a goal of being creative in trying to keep your budget down. Think of ways to give homemade items, or use unused credit card points or gift cards to fund your purchase.

“Your family doesn’t want you to be in credit card debt, either,” Rossman said. “Try to resist the temptation to overspend on the latest and greatest.”

Finally, avoid deals like buy now, pay later unless you have truly thought through how that debt will fit into your overall budget. While some of those deals offer 0% interest, others do not. Moreover, adding multiple monthly bills by purchasing several items this way can cripple your budget, Rossman said.

“A lot of people don’t even view that as debt, and I think that is a bit of a slippery slope,” Rossman said.

CreditCards.com’s online survey was conducted in mid-October and included 2,485 adults.

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Congress hits ‘standstill’ as December shutdown, debt cliff near

“Then make an offer!” Senate Appropriations Chair Patrick Leahy (D-Vt.) retorted about his Republican counterpart’s grievances with the funding plans Democrats have offered.

The next shutdown threat hits at midnight on Dec. 3, when federal cash stops flowing from the temporary spending patch Congress enacted to keep the government funded after the new fiscal year started on Oct. 1. Another debt cliff is also expected as soon as next month, since the Treasury Department already exhausted the $480 billion in extra borrowing power Congress granted three weeks ago.

While the pressure is on to clinch deals on funding the government and addressing the debt limit before early December, the energy in Congress is sapped by bigger spending fights as Democrats labor to pass President Joe Biden’s social policy package and the bipartisan infrastructure bill.

Shelby predicted Congress is headed for another stopgap spending patch come Dec. 3 and probably another once that one expires. Leahy said that fate would be the minority party’s doing.

“Right now, the offer is a continuing resolution, which is a major cut in defense,” said Leahy, noting that another patch would deprive the Pentagon of the funding increase Republicans are seeking. “And if they’re in favor of a major cut in defense, that’s their decision.”

House Majority Leader Steny Hoyer said Tuesday that Democrats must finish work on Biden’s $1.75 trillion social spending package and the Senate-passed infrastructure bill before the party can devote its attention to annual government funding or act on the debt limit, to ensure the Treasury Department can continue to pay the government’s bills.

Democrats still say they aren’t planning to lift the debt ceiling by using the reconciliation process — the only way they could remedy the issue without GOP votes in the Senate. “I don’t think it’s on the table,” Hoyer said. “Whether it’s completely off the table, my view is, we need to deal with the debt limit. … And we should be dealing with the debt limit in a bipartisan way.”

The nation could hit that borrowing limit as early as Dec. 3, or Treasury could muddle through for several more weeks or months depending on federal cash flow. The Bipartisan Policy Center, which consistently forecasts the debt limit’s brink with accuracy, predicted last week that the Treasury Department would fully exhaust its borrowing ability sometime between mid-December and mid-February.

Hoyer told reporters on Tuesday that both the debt limit and averting a government shutdown are “very pressing.” But he said Democrats need to get their infrastructure and social spending bills done before “we can give full time and attention to those two critical issues.”

Not all Democrats are buying that justification for delay.

Sen. Jon Tester (D-Mont.), who chairs the spending panel that funds the Department of Defense, said Tuesday that “we make up excuses around here that we don’t need to make up.”

“I think we can walk and chew gum at the same time — truthfully,” he said. “There should be a motto around here: ‘Why do today what we can do tomorrow?’ It’s ridiculous. It isn’t just because of this Congress. It has been that way for several Congresses.”

The way to jump start a final agreement to fund the government, Tester said, is to strike a compromise on the two totals for defense and non-defense spending.

“If we get a top line number, the bills are ready to go,” he said. “And then you just rock and roll. But just get a top line number.”

Delaying a final funding agreement is undermining the U.S. national defense, Tester warned, pointing to “challenges” with China and Russia.

On the other side of the aisle, Republican appropriators are also rooting for top party leaders to agree on overarching funding totals. Sen. Susan Collins (R-Maine), who is expected to become her party’s chief appropriator when Shelby retires next year, said the discrepancy between the 13 percent increase Democrats are proposing for non-defense programs and the 5 percent boost for defense “absolutely has to be resolved” at the outset.

“First of all, we have to have a higher topline for defense spending,” said Collins, the top Republican on the spending panel that funds the Department of Transportation, as well as Housing and Urban Development.

Collins noted that the House easily passed a defense policy bill in September that endorsed a more than $25 billion increase in military funding over Biden’s budget request.

“The House has been taking steps in that direction,” she said. “So to me, that’s the biggest issue for us to remedy.”

But Democrats are still consumed with finalizing Biden’s two biggest legislative priorities, which have already sucked up the calendar for months. Congressional leaders are pushing for a House vote on the infrastructure package this week after two failed attempts, while ironing out major outstanding obstacles to party unity on Biden’s social spending measure, including plans to lower prescription drug costs.

With breaks scheduled in both chambers ahead of Thanksgiving, time is running short to sew up congressional work on the cornerstone bills of Biden’s agenda, let alone pass a slate of bipartisan appropriations bills before the early December deadline.

Shelby said Tuesday that Democrats will first need to agree to kill liberal policy priorities in their government funding bills if they want to begin serious talks toward a final deal. That includes continuing the Hyde amendment ban on federal funding for abortion.

“We’d like to work to ‘yes,’ but not at any cost,” Shelby said. “We want to knock off the table all their social issues that they put in. … Otherwise, the bill will never move off the floor.”

House Appropriations Chair Rosa DeLauro, who hosted the meeting Tuesday, said it’s an “empty threat” to suggest Congress could be headed toward a “full-year” stopgap spending bill that would keep funding levels static for the entirety of the fiscal year, essentially repeating the same totals agreed upon during Donald Trump’s last year as president.

“I am ready to review a proposal from our Republican counterparts,” DeLauro said in a statement after the meeting. “They need to come to the table so we can keep a December process on track.”

Nicholas Wu contributed to this report.

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