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Bonds, Stocks, Economy: How China’s Property Woes Are Spilling Overseas

Marco Metzler of Switzerland gets 2,000 new followers a day on LinkedIn, all watching to see what will happen to his money. Metzler invested $50,000 last month in the offshore bonds of real estate developer China Evergrande Group to see if he would get any returns. The former Fitch Ratings analyst is not expecting much. He’s out to prove a point about China’s troubled property sector by chronicling the fate of his investment on social media.

“I was concerned about what was going on, and from my past I’m able to read rating reports and also to see what’s going on in the world in economics, and I felt obligated to speak out to the world and to warn about that situation,” Metzler told VOA. “We didn’t invest to get the money back, so I’m fully aware this will be lost.”

Evergrande has struggled since last year, when the Chinese government began clamping down on the country’s property sector to rein in excessive debt and cap speculation.

Towering apartment blocks today extend far into the suburbs of major Chinese cities, but many flats are unoccupied, owned instead by absentee speculators and their banks. Evergrande Group, one of China’s biggest property developers by revenue, is now selling assets and may be staring down a massive restructuring to ease debt.

Companies or governments that invest in offshore bonds, and individuals who trade stocks listed outside mainland China and its $15.42 trillion economy, are coming to terms — albeit more quietly than Metzler — with the Chinese property crisis of 2021. These troubles are threatening bond returns, lowering some stock prices and could erode at least a quarter of the world’s second largest economy.

“I don’t think anyone debates the importance of the real estate market on the Chinese economy,” said James Macdonald, head of the property services firm Savills Research in Shanghai, who estimates real estate at 25% to 30% of China’s economy.

“If we do see a significant slowdown in the real estate market, it will have an impact in terms of domestic economic growth rates, and that could have a knock-on effect in terms of global economy,” Macdonald said.

As many analysts have noted, any major economic shocks that hit China, a country closely tied to the global manufacturing supply chain, and whose massive consumer base importers and exporters rely on, are inevitably felt around the world.

Property crisis: Evergrande and beyond

Evergrande is a bellwether firm that is more than $300 billion in debt. Hong Kong-listed shares in Evergrande have tumbled since February, though the developer averted default in October by paying interest on an overseas bond.

Another Chinese development giant, Kaisa Group Holdings, faces limited funding access and uncertainty over refinancing a “significant amount” of U.S.-dollar bond payments into next year “in light of ongoing capital-market volatility,” Fitch said in an e-mailed news release last month.

Smaller property developers are likely to rattle bond markets outside China because they are “less sound” than bigger ones, said Lillian Li, a vice president-senior credit officer at the Moody’s ratings service.

“We see that the offshore bond market has actually shown larger volatility than the domestic market in front of these regulatory crackdowns, including in the property sector,” Li said.

The Hang Seng Properties Index in Hong Kong, where foreigners are allowed to trade shares of Chinese companies, has lost about 1.2% year to date.

Municipal officials in some cities capped home purchase prices in September to deter speculators, further hobbling property momentum in China. The domestic property market could shrink by half a percent in 2022, Li said. Last month, prices for new as well as resale homes fell amid a fall in construction starts.

What happens next

Evergrande has offered its investors cash payment by installments as well as putting forth actual structures as repayment assets, the state-run China Daily news website says.

Central government officials hope to contain property speculation and leave property for people to occupy, the official Xinhua News Agency reports.

About $52 billion in Chinese property bonds will mature next year and $44 billion the following year, said Henry Chin, Asia Pacific research head with the real estate services firm CBRE. Other bond issuers will default, he forecasts.

No offshore investors want the bonds now, said Liang Kuo-yuan, president of the Taipei-based Yuanta-Polaris Research Institute, though he believes Taiwanese insurers and pension funds have invested in the past.

“Taiwan’s insurers more or less will buy high-yield and high-risk investment products, because the interest rates on policies they’ve sold in the past are too high,” Liang said.

Evergrande was once seen as the epitome of a Chinese property mainland market, Liang added. China’s real estate sector, the world’s largest, grew briskly from 2010 to 2018, says investment bank J.P. Morgan.

But not all is lost, some analysts say.

Investors in private equity for distressed debt could get a lift from China’s property spillover if companies look for new ways to repay debt, said Chin of CBRE. Some stock-buying vehicles have made money, too. Shares of the TAO-Invesco China Real Estate exchange-traded fund of Chinese stocks including Evergrande, for example, has grown 65% year to date.

But back in Switzerland, Metzler wrote on LinkedIn that Evergrande had “officially defaulted on overdue interest payments” and that his current company, DMSA, would file a bankruptcy case against the group. He calls China’s property market “a first domino” in a broader financial and economic crisis.

“The old system needs to come down before a new system will be established,” he told VOA.

Source: Voice of America

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Delhi’s Air Pollution Crisis Prompts Shutdown of Thermal Plants, Schools, Colleges

With the Indian capital enveloped in a haze of toxic smog, authorities ordered six thermal plants in the city’s vicinity to shut temporarily, closed schools and colleges indefinitely and imposed work-from-home restrictions to control pollution levels that turned severe on several days this month.

A panel of the federal environment ministry has also banned construction activity until the end of the week and barred trucks, except those carrying essential commodities, from entering the city as part of the series of emergency measures.

Environmentalists pointed out that these steps would only marginally mitigate the air pollution crisis that grips New Delhi every winter.

“The emergency action is not a magic bullet that will address the pollution crisis,” said Anumita Rowchowdhury, executive director research and advocacy at New Delhi’s Center for Science and Environment. “It only ensures that it will not worsen the pollution but it will not clean the air.”

The world’s most polluted capital city has recorded levels for dangerous particles known as PM 2.5 that settle deep inside lungs many times higher than the standards set by the World Health Organization.

The haze that covers the city is a mix of fumes, including vehicular emissions, industrial pollution, construction dust, farm fires and fumes caused by the burning of waste in the open. In winter, the pollutants hang over the city due to low wind speeds.

City authorities in Delhi have told the Supreme Court they are considering a weekend lockdown, similar to what was implemented during the pandemic. If so, it would be the first of a kind “pollution” lockdown.

The toxic smog is not restricted to the capital city — skies across much of North India also turn grey at this time of the year leaving millions gasping for air.

But while Delhi has taken some steps to combat the dirty air by shutting down coal-fired power stations and switching most industry and public transport to clean fuel, the same standards have not been imposed by neighboring states, experts point out.

“Air does not respect political boundaries. The time has come to take a regional approach and scale up stringent action in the entire Indo-Gangetic plains,” said Roychowdhury. “For example, Delhi is the only city to have switched industry to natural gas, imposed clean fuel standards for vehicles and shut down coal plants. But the same needs to be done elsewhere. We really need to ramp up our energy transition.”

However, phasing out coal, which still powers 70% of India’s electricity grid, will not be easy. As North India battled its annual air pollution crisis, Indian delegates to the recent climate summit held in Scotland said developing countries were entitled to the responsible use of fossil fuels.

“How can anyone expect that developing countries can make promises about phasing out coal and fossil fuel subsidies?” Environment Minister Bhupender Yadav asked at the summit. “Developing countries have still to deal with their development agendas and poverty eradication.”

India and China were blamed for watering down a commitment to phasing out coal at the summit.

But in India, environmentalists said the country’s concerns were genuine. “The dilemma that India faces is, how quickly can it make the transition from coal?” said Chandra Bhushan, who heads the Delhi-based International Forum for Environment. “While coal does contribute to air pollution and climate change, we cannot shut down coal right away and replace it with renewables in a hurry. This is going to be a process.”

Meanwhile, the severe air pollution has led to a public health emergency with many residents in Delhi and other North Indian cities struggling with respiratory problems and doctors warning it is a serious health hazard.

The dirty air kills more than a million people every year in India according to a report by the Energy Policy Institute at the University of Chicago, a U.S. research group.

Source: Voice of America

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US Reportedly Negotiating Deal with Pfizer to Purchase 10 Million Doses of Experimental COVID-19 Pill

News outlets say the administration of U.S. President Joe Biden is planning to spend $5 billion to purchase Pfizer’s new experimental antiviral pill designed to treat COVID-19, enough to cover 10 million courses of treatment.

The revelation comes a day after the U.S. drugmaker announced it had signed a deal with Geneva-based Medicines Patent Pool, a United Nations-backed public health group, to authorize generic drugmakers to produce its experimental COVID-19 pill for 95 countries.

The deal will make the pill available for low- and middle-income countries comprising about 53% of the world’s population.

Pfizer says its new pill, called Paxlovid, reduces the risks of hospitalization and death by nearly 90% in people with mild to moderate coronavirus cases. Independent experts recommended ending Pfizer’s study because of its encouraging results.

Tuesday’s agreement between Pfizer and the Medicines Patent Pool coincided with Pfizer’s application to the U.S. Food and Drug Administration to authorize use of the drug on an emergency basis.

“It’s quite significant that we will be able to provide access to a drug that appears to be effective and has just been developed, to more than 4 billion people,” said the Medicines Patent Pool’s Esteban Burrone.

Yuanqiong Hu, a senior legal policy adviser at Doctors Without Borders, said the organization is disappointed the agreement does not make the pill available to all countries.

“The world knows by now that access to COVID-19 medical tools needs to be guaranteed for everyone, everywhere, if we really want to control this pandemic,” she said.

Pfizer will not receive payments on sales in low-income countries, where fewer than 1% of its COVID-19 vaccine doses have been provided. It also will waive royalties on sales in all countries covered by the deal while COVID-19 remains a public health emergency.

The Medicines Patent Pool announced in October that another U.S. drugmaker, Merck, agreed to allow other companies to make its COVID-19 pill available in 105 poorer countries.

Merck says its antiviral pill reduces the risk of severe illness from COVID-19 by half when administered soon after the appearance of the first symptoms.

The Biden administration has pledged to spend about $2.2 billion to purchase about 3.1 million doses of Merck’s pill once it has been approved for use by the Food and Drug Administration. An FDA advisory panel will meet on November 30 to discuss Merck’s COVID-19 pill. British drug regulators granted authorization for Merck’s pill earlier this month.

Despite decisions by Pfizer and Merck to share their COVID-19 drug patents, Pfizer and other vaccine-makers have refused to release their vaccine formulas for broader production.

Source: Voice of America

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White House: 10% of Kids Have Been Vaccinated in First 2 Weeks

The White House says about 10% of eligible kids aged 5 to 11 have received a dose of the Pfizer COVID-19 vaccine since its approval for their age group two weeks ago.

At least 2.6 million kids have received a shot, White House COVID-19 coordinator Jeff Zients said Wednesday, with 1.7 million doses administered in the last week alone, roughly double the pace of the first week after approval. It’s more than three times faster than the rate adults were vaccinated at the start of the nation’s vaccination campaign 11 months ago.

Zients said there are now 30,000 locations across the country for kids to get a shot, up from 20,000 last week, and that the administration expects the pace of pediatric shots to pick up in the coming days.

Kids who get their first vaccine dose by the end of this week will be fully vaccinated by Christmas, assuming they get their second shot three weeks after the first one.

Pace varies among states

State-by-state breakdowns of doses given to the age group haven’t been released by the White House or the Centers for Disease Control and Prevention, but figures shared by states show the pace varies. About 11% to 12% of children in that age group have received their first doses in Colorado, Utah and Illinois, but the pace is much slower in places like Idaho (5%), Tennessee (5%) and Wyoming (4%), three states that have some of the lowest rates of vaccination for older groups.

The White House was stepping up its efforts to promote kid vaccination, with first lady Jill Biden and the singer Ciara taping a video Wednesday encouraging shots for kids.

The first lady also visited a Washington pediatric care facility along with Surgeon General Dr. Vivek Murthy, the Washington Mystics’ Alysha Clark and the Washington Wizards’ Thomas Bryant.

“You’re the real heroes,” Biden told newly vaccinated kids. “You have your superpower and now you’re protected against COVID.”

Biden also warned parents against misinformation around the vaccines and emphasized their safety.

“I want you to remember and share with other parents: The vaccine protects your children against COVID-19,” she said. “It’s been thoroughly reviewed and rigorously tested. It’s safe. It’s free, and it’s available for every single child in this country 5 and up.”

Source: Voice of America

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AU Sets Up Nairobi Situation Room to Help Africa Mitigate Disasters

With the Earth becoming warmer and weather events more extreme, the African Union has set up a disaster operation center in Nairobi to help monitor major hazards and provide regional early warnings for drought, floods, extreme rainfall, food insecurity, and pests like the desert locust.

Major floods have become more common in Africa and show how vulnerable the continent is to climate change, even though it’s the lowest producer of greenhouse gas emissions in the world.

To cope with such disasters, the African Union has set up a centralized monitoring and early warning system for the continent. The Nairobi Disaster Operation Center for the East African region is the continent’s first weather “situation room.”

“Council of the ministers within the member states sat and said we need to have a disaster operation center in Nairobi, which will focus mainly on early warning systems,” said Jully Ouma, a geographic information system analyst at the Intergovernmental Authority on Development, or IGAD, in Nairobi. “So, that gave birth to the establishment of this office so that we look at broader aspects of different disasters within the region.”

The center — located at the IGAD Climate Prediction and Applications Center — uses East Africa Hazards Watch, a system developed by the center for collecting and sharing multi-hazard data with member countries.

“The system works automatically so that it ingests in the data set,” Ouma said, adding, “We have a super computing system within ICPAC, so there is less human attachment to it. It is also near real time. So, in every 10 days it updates itself and then we see the conditions of drought.”

The center provides climate information and early warnings to 11 East African countries. Officials say local communities must be ready to respond quickly to save lives and minimize damage.

“So, we must equip the communities themselves to be able to respond to a disaster in its first hours at least,” said Amjad Abbashar, regional director for Africa at the U.N. Office for Disaster Risk Reduction. “And so, I think we owe it to them to set up these early warning systems and ensure that it is functional, and that people who are vulnerable to disasters are able to access that information in a timely way, to save lives and property.”

The situation room in Nairobi covers and reports on drought and floods. Another one in Niger, set to open this month, will monitor extreme rains and cyclones. The information collected at both sites will be distributed by the situation room at the AU headquarters in Addis Ababa.

“We are responding to a very complex situation,” said Gatkuoth Kai, technical coordinator for disaster risk reduction at the Africa Union Commission. “Over the years, we have seen disasters increasingly becoming borderless. But even when a hazard is localized, the intensity easily overwhelms the national response. And in this situation, the Pan African solidarity is required. Therefore, having this situation room is going to facilitate that African solidarity.”

As Africa experiences more extreme weather, officials say early warnings and early action will help limit its impact.

Source: Voice of America

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Canada Landslides Leave 1 Dead, 2 Missing, Port’s Rail Access Cut

The port of Vancouver, Canada’s largest, said on Tuesday that all rail access had been cut by floods and landslides farther east that killed at least one person and left two others missing.

Two days of torrential rain across the Pacific province of British Columbia touched off major flooding and shut rail routes operated by Canadian Pacific Rail and Canadian National Railway, Canada’s two biggest rail companies.

“All rail service coming to and from the Port of Vancouver is halted because of flooding in the British Columbia interior,” port spokesperson Matti Polychronis said.

At least one person was killed when a mudslide swept cars off Highway 99 near Pemberton, some 100 miles (160 kilometers) to the northeast of Vancouver.

Search and rescue crews were combing through the rubble for signs of survivors or additional casualties, officials said.

Vancouver’s port moves C$550 million ($440 million) worth of cargo each day, ranging from automobiles and finished goods to essential commodities.

The floods temporarily shut down much of the movement of wheat and canola from Canada, one of the world’s biggest grain exporters, during a busy time for trains to haul grain to the port following the harvest.

This year drought has sharply reduced the size of Canada’s crops, meaning a rail disruption of a few days may not create a significant backlog, a grain industry source told Reuters.

Del Dosdall, senior export manager at grain handler Parrish & Heimbecker, said he expected some rail service could be restored by the weekend. Another industry source said he expected the shutdown to last weeks.

Floods have also hampered pipelines. Enbridge shut a segment of a British Columbia natural gas pipeline as a precaution.

The storms also forced the closure of the Trans Mountain pipeline, which carries up to 300,000 barrels per day of crude oil from Alberta to the Pacific Coast.

Copper and coal miner Teck Resources Limited said the floods had disrupted movement of its commodities to its export terminals, while potash exporter Canpotex said it was looking for alternatives to move the crop nutrient overseas.

Directly to the south of British Columbia, in Washington state, heavy rains forced evacuations and cut off electricity for more than 150,000 households on Monday. The U.S. National Weather Service on Tuesday issued a flash flood warning in Mount Vernon, Washington, “due to the potential for a levee failure.”

Some areas of British Columbia received 20 centimeters (8 inches) of rain on Sunday, the amount that usually falls in a month.

Authorities in Merritt, some 200 km (120 miles) northeast of Vancouver, ordered all 8,000 citizens to leave on Monday as river waters rose quickly, but some were still trapped in their homes on Tuesday, said city spokesman Greg Lowis.

Snow blanketed the town on Tuesday and some cars could be seen floating in the flood waters still up to 1.22 meters (4 feet) high. The towns of Chilliwack and Abbotsford ordered partial evacuations.

Rescuers equipped with diggers and body-sniffing dogs started dismantling large mounds of debris that have choked highways.

The landslides and floods come less than six months after wildfires gutted an entire town, as temperatures in the province soared during a record-breaking heat dome.

Source: Voice of America

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