China Vanke Seeks One Year Delay to Pay Bond

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00:00what this tells us we had this obviously expectations but now it's finally happened

00:05and what do we understand? Yeah it definitely shows bankers under severe liquidity strains now

00:10and I think the plan we are seeing about the one year delay is actually worse than lots of

00:15you know investors expectation and bankers also have another yuan notes in over three billion

00:21yuan you know coming during late December so right now investors are expecting that yuan

00:26will probably see the same treatment and you know overall Vanka has you know more than 13 billion

00:33yuan coming by due by the end of next June so investors are wondering whether what happened

00:39to other yuan though as well yeah. Christy you talked about your latest reaction piece I mean

00:46it's a one year delay and you're saying the impact from this could be even greater than what we saw

00:51with Evergrande and Country Garden why? Right so from a housing sentiment standpoint I think

00:58incrementally speaking this is less big of a shock than Evergrande and Country Garden when it happened

01:04but the significance here is that Vanka is a state-backed developer so I think with its

01:11failure to pay its bond payment I think the significance here is that investors will start

01:18to worry you know how safe are state-backed developer including local government owned developers

01:23or centrally owned developer how should we perceive them and I think that would change the perception

01:28of home buyers are they still confident in buying pre-sold homes from state-owned developers

01:35so so far in this year year today state-owned developers the sales are down nine percent

01:41versus private developers they're down 29 percent so throughout the crisis state-owned developers

01:47they're relatively unscathed and the contagion has been contained in the private developer space

01:53but I think with what happened to Vanka which is you know which has a larger shareholder from

01:59Shenzhen Metro which is a state-owned entity I think this is going to be a tipping point for the market

02:04how does that then also play into what happens next if you have that fear that starts to spread and

02:11that risk of contagion what are the next things that you actually watch out for

02:14yeah so next week Vanka will held meetings with bondholders try to see their support for the

02:20you know you know delays so we will definitely watch closely about how much support they can get

02:26if they cannot get enough support it will be a default and also you know I think offshore bondholders

02:32are also watching closely on this because you know offshore they have you know over 1.3 billion dollar

02:38notes so they are watching closely about what's happening onshore and then how this is going to impact them as well

02:44what are you what are people telling you about this right now I mean people are saying they're

02:47liking us to what Country Garden to like Evergrande in terms of eventual recoveries what sort of

02:53scenarios are they mapping out now I think right now the pricing already you know pricing about the

02:59recovery rate right and then I think investor are definitely as Christy said trying to reprocess

03:04what's the government's stance on this property crisis and I think right now it's actually Vanka maybe

03:10on their own to deal with this debt issue because previously always relied on its largest shareholder

03:16Shenzhen Metro and also the government support but right now it's actually the moment people need to

03:21think about how they're going to repay those debt and then amongst all of this we've had China telling

03:27stats providers to withhold key data on home sales how does that also add to the level of angst do you

03:36think and why exactly is that happening right so it was a big surprise yesterday because the two

03:41private data providers have been consistently releasing this data end of every month and now

03:47that it seems to be that there's more intervention from the government to try and control the narrative

03:53and shield home buyer confidence and I think from here you would possibly see more government actions

04:00to try and mitigate the impact on Vanka's debt crisis on the overall home sales market but as I said

04:08before there's limited ammunition in the policy toolbox mortgage rate and down payment ratios are already

04:14at record low and also you are seeing home purchase restrictions they're already relaxed in most of the

04:20cities except a few so I think what we can do from here is more limited what are your models and the like

04:27telling you about what November's data is going to look like then right so November data what we

04:34have predicted earlier is an over 30 percent decline year over year because last year same time last

04:40year we had a high base from aggressive stimulus policy if you remember and the data did came out and we

04:46had access to that and the number came up to be a 36 percent year over year decline we accept we expect

04:51December to continue to have that kind of steep decline which is important because the end sales push is

04:59very important for developers to try and catch up at the end of the year

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