Beyond Evergrande, China’s Property Market Faces a $5 Trillion Reckoning

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The Wall Street Journal 10 October, 2021 - 11:07am 13 views

Evergrande debt deadline, chip supply outlook, Uniqlo results

Nikkei Asia 10 October, 2021 - 04:00am

Welcome to Your Week in Asia.

This week will kick off with a nail-biter: Chinese property developer Evergrande will face another debt payment deadline on Monday. Investors will be closely following a string of Chinese economic indicators later in the week for further clues on the country's financial condition.

Uniqlo owner Fast Retailing and Muji operator Ryohin Keikaku, both of which have large businesses in China, will announce earnings on Thursday.

Thursday could also be a big day for supply chain watchers. Taiwan Semiconductor Manufacturing Company, the world's largest contract chip manufacturer, is providing its industry outlook for the holiday season of 2021 and a peek into 2022 in its earnings conference.

Get the best out of our coverage on these events and much more by following us on Twitter @NikkeiAsia.

China Evergrande Group, which missed two offshore bond interest payments last month, faces more deadlines this week. It is staring at three dollar bond coupon repayments worth a combined $148.1 million, according to Refinitiv data. The company, which is fast running out of cash, has a 30-day grace period to make the payments before it is labelled a defaulter. Evergrande, which has more than $300 billion in liabilities, missed an $83 million interest payment on Sept. 23 and another of $46 million on Sept. 29.

Evergrande's missed deadlines to pay banks, suppliers and retail creditors has led to the suspension of more than half its 800 projects across China. The company is trying to sell assets and attract investors. The Evergrande crisis, along with missed bond repayments by rivals including Fantasia Holdings, has unnerved investors and sent the cost of China high yield borrowing soaring. The troubles at Evergrande, if not contained quickly, would roil a Chinese real estate industry already in a sales slump -- and could have wider fallout for the world's second-largest economy.

Follow our latest coverage on the Evergrande saga.

Australia's state of New South Wales -- home to Sydney -- is ending a months-long COVID-19 lockdown, at least for those who can show proof of full vaccination. Businesses ranging from gyms to hair salons and restaurants will be allowed to open with customer density limits, among other easing steps. The state has inoculated over 70% of residents aged 16 and over, according to local media.

The Bank of Korea is expected to raise its key interest rate by 25 basis points to 1%, following an increase at its previous meeting in August. The central bank signaled that it's time to stabilize financial and housing markets as easy money has boosted asset prices sharply during the pandemic.

However, some economists forecast that the BOK may wait until next month to hike the benchmark rate to avoid raising the debt-servicing burden of households too quickly, which could negatively impact consumption.

The G20 summit won't be until the end of the month, but Italy will convene leaders for an extraordinary summit on Tuesday to lay down strategies for Afghanistan. Italian Prime Minister Mario Draghi said the world's richest countries had a "duty" to act to prevent a humanitarian crisis. Leaders will also discuss ways to accommodate refugees, provide humanitarian and financial aid, ensure political stability, protect the rights of women and girls, and prevent Afghanistan from becoming a hotbed of terrorism.

Economists expect China's trade growth in September to decelerate as major economies recover from the pandemic. The rate of inflation, due to be announced on Thursday, may rise because of energy outages and supply disruptions.

Indian IT majors Infosys and Wipro are likely to post robust growth as they announce their second quarter earnings amid strong demand for their services. "Covid-19 has made industries across the globe bring about changes to adapt to the Work from Home environment with minimal disruption to their business models. This also led businesses to change their model from captive to outsourcing, which is expected to benefit Indian IT companies," brokerage and research firm ICICI Direct said in a recent note.

Another domestic brokerage house, Motilal Oswal, expects top Indian IT companies to deliver Q2 revenue growth between 3.9% and 6.9% quarter-on-quarter in constant currency terms.

The International Energy Agency will be releasing its flagship report World Energy Outlook on Wednesday, ahead of the 26th U.N. Climate Change Conference in November. The report will look at the clean energy transitions required to keep global warming below 1.5 C from pre-industrial levels. As energy consumption accounts for a significant portion of global greenhouse-gas emissions, countries will be pressed to make bold plans to cut carbon emissions, while also ensuring energy security and economic development.

Japanese Prime Minister Fumio Kishida will dissolve the lower house on Oct. 14 and call a general election, 10 days after he was elected as the nation's leader. Kishida, and the ruling Liberal Democratic Party, are seeking to capitalize on a bump in public support sparked by the LDP's leadership change.

Uniqlo owner Fast Retailing and Muji operator Ryohin Keikaku will announce full-year earnings results for the fiscal year that ended in August. Fast Retailing expects full-year net profit will rise 83% to 165 billion yen, while Muji estimates its full-year net profit will be 34.8 billion yen. As the world recovers from the pandemic, attention will focus on how the resurgence of infections in some regions has affected retailers' earnings.

Taiwan Semiconductor Manufacturing Co. -- the world's largest contract chipmaker and a key barometer of electronics demand thanks to its wide portfolio of customers-- is set to provide an industry outlook for the holiday season of 2021 and a peek into 2022. The chip giant will also give its view on the unprecedented global supply crunch at this earnings conference.

The event also comes as the U.S. government demands all major chipmakers and electronic device manufacturers hand over confidential information including customers' sales and inventory data. Washington wants to mitigate the nearly year-long chip shortage that have hit a swath of industries, from PCs to automobiles. TSMC has said it will not provide confidential data, especially those associated with customers. The chipmaker is still evaluating how to answer the list of questions before Nov.8

Singapore will release preliminary GDP data for the July-September quarter on Thursday, as the country fights a significant resurgence of COVID-19 infections. A September economists survey compiled by the Japan Center for Economic Research and Nikkei pointed to a 6.8% rise for the quarter from a year earlier. While the city-state leads the region in vaccination progress, the recent coronavirus spike and China's slowdown are among downside risks for its economy going forward.

The 2021 European Union Investment Forum in Taiwan will take place online on Thursday. The forum, first launched in 2020, is designed to increase bilateral investment activities between the European bloc and Taiwan. The head of the European Commission's Directorate-General for Trade, Sabine Weyand, will deliver a keynote speech at the forum. The EU has launched efforts to bring more semiconductor manufacturing onshore amid the unprecedented global chip shortage. TSMC has said it sees Germany as a possible location for its first chip plant in Europe.

Bali's partial reopening to international visitors 

Indonesia will partially reopen the popular holiday island Bali to some international tourists. Arrivals from countries such as China, Japan and South Korea have been mooted to be part of the program, while those arriving will have to quarantine for eight days. Bali is dependent on tourism, and has seen its economy decimated by the pandemic. The government hopes a partial reopening will be able to restore some economic activity in the so-called "Island of Gods."

The semiannual Canton Fair, China's largest and longest running trade expo, will welcome back visitors to Guangzhou for the first time in two years. But since China's strict COVID restrictions will largely block those overseas from attending, the fair will continue to offer exhibits online, maintaining the format of the last three expos. With the country still on coronavirus alert, the fair will run for just five days, one-third the normal duration.

Japan's annual Ceatec electronics expo will have an opening event on Friday. The main event will be hosted from Oct. 19 to Oct. 22. Under the slogan "Toward Society 5.0 with the New Normal," the exhibition will feature technologies in the areas of decarbonization, mobility, 5G and smart cities. Toshiba's CEO Satoshi Tsunakawa will be giving a keynote speech on Friday, on the company's efforts on carbon neutrality and infrastructure resilience. The CEO of Norway's software company Cognite will also be giving a speech about profitability, sustainability and digital transformation.

The Philippines starts inoculating children with comorbidities aged 12 to 17, as the Southeast Asian nation expands its vaccination drive. The country, which ranked last in the Nikkei COVID-19 Recovery Index in September, had fully vaccinated 22.7 million people or 21% of the total population as of Oct. 6.

An Australian royal commission of inquiry is due to deliver a recommendation on whether Crown Resorts is "suitable" to continue operating its flagship casino resort in Melbourne.

The eight-month probe by the state of Victoria follows on the heels of a similar inquiry in neighboring New South Wales. That investigation concluded that the company was not fit to offer gambling at its new luxury hotel in Sydney, due to its failure to prevent money laundering at Crown Melbourne and other problems -- although it also offered the business the chance to reform.

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