Fast abstract: Evergrande is a real-estate developer from China that has $305 billion of liabilities and can’t pay of their debt. They aren’t the one firm although, different real-estate corporations are additionally dealing with liquidity issues and it seems just like the property bubble in China is collapsing. Proper now, the Chinese language authorities is doing what they will to manage the scenario (permitting them to default on loans, setting a worth ground on property). https://www.reuters.com/enterprise/fitch-says-possible-china-evergrande-default-may-have-broader-effects-2021-09-15/
Given this situation, how would you attempt to make a play right here? There are 3 potential outcomes right here: (1) Chinese language authorities bails them out; (2) Chinese language authorities step in and information them to deflat slowly; (3) Full collapse.
(1) I believe that is unlikely as there are too many real-estate corporations in monetary difficulties proper now to bail all of them out efficiently. Additionally a bit uncharacteristic of the federal government to take action.
(2) I consider that is the most probably situation, however that will switch the burden onto banks (each Chinese language and worldwide) as they won’t be getting repayments for his or her loans to Evergrande. Would shorting financial institution shares be a good suggestion right here?
(3) Unlikely for now however may occur if situation (2) goes badly. If that’s the case, your complete Chinese language market will likely be bearish, so $YANG may be a good selection right here.
Another concepts they you possibly can consider?