Is the Far East bubble popping?

[william the wie]

as of yesterday China, Japan and Australia have all reported bad news in both real estate and industrial production. Is everybody too focused on the Euro problem? Just wondering.

 

[KissMy]

China realty bubble bursts in bond markets

SINGAPORE: Dollar bonds sold by China real estate companies this year are the worst performers among Asian non-financial corporate debt denominated in the US currency amid concern the nation’s property market is overheating.

Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings, Country Garden Holdings and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data compiled by Bloomberg.

That’s more than the 2.05 percentage point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan.

Investors are demanding greater yields to lend to China property firms, a sign they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending. Goldman Sachs Group and Credit Suisse Group cut their profit estimates for Chinese real estate companies after a 12.8% jump in real estate prices in April from a year earlier spurred the state to increase regulation.

“New issues by Chinese developers will stall for the time being,” Vince Chan, the Hong Kong-based chief credit strategist with Amias Berman, a fixed-income advisory and brokerage firm founded by two former Citigroup bankers, said in a phone interview. “Investors need handsome rewards for getting exposed to weaker fundamentals.”

Widening Spreads - The amount of dollar bonds issued by China developers represents 45% of all corporate dollar debt sales in Asia outside Japan this year, Bloomberg data show. The yield spread on $350 million of 13.5% notes sold by Shenzhen-based Kaisa last month widened the most of the nine issues, expanding to 16.52 percentage points from 11.07 percentage points, Nomura Holdings prices on Bloomberg show.

Kaisa is developing 18 projects in Shenzhen, Dongguan and other cities in the Pearl River Delta, most of them high-rise residential complexes that combine recreational and commercial space, according to its website. An investor who bought the company’s 2015 bonds at par would have lost 15.5%.

 

[antagon]

just the first tremors, i suspect, but it will pop, for sure. china is certainly the most overrated economic challenger on the map. many hurdles yet to hop for them, yet respectable folks persist in the starry-eyed appraisals. <--- this is a bubble indicator on my radar.

 

[antagon]

from this comprehensive china-bear compilation:
THE SLOWDOWN IN CHINA CONTINUES | PRAGMATIC CAPITALISM

 

[editec]

Well...weren't we all sort of expecting a slowdown in China's economy?

So much of it is based on exports.

And the nations which it depended on for export revenues are going broke.

And when their economy falters (as our has) naturally the value of the real estate is apt to drop as their workers cannot pay for their (probably also) overpriced RE.

The vicious cycle of deflation continues, folks.

 

[Neubarth]

As I have been saying.

 

[Toro]

It may be. Canada and Australia will be hit especially hard if it is.

 

[william the wie]

It may be. Canada and Australia will be hit especially hard if it is.

According to au.com a housing correction is happening now. The Australian nickle mine has been closed and China is importing less across the board. Industrial production has declined for both nations. This may stay in the correction zone for months it took 29 months from first break in momentum to meltdown in this country but there is insufficient data to tell when this started in China. There were regional real estate corrections in Australia last year. The declines in both federal and state homebuyer credits have not been coordinated so it is hard to determine a starting date there too, not as hard with China but still hard.