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Wednesday, 15 September 2021

Dogecoin copycats everywhere + worries that the world’s most indebted company threatens China’s banking sector

SOUND SMART- Could the world’s most indebted company spark a (kinda-sorta) 2008-style systemic banking crisis in China? That’s the question smart observers are asking amid news that Evergrande, China’s second-largest property developer, could be on the verge of defaulting on its massive debt obligations. Formally known as China Evergrande, the developer does upper- and middle-class housing in nearly 300 Chinese cities and is sitting on more than USD 300 bn in debt — with USD 7.4 bn in bonds due next year, making it quite possibly the world’s most indebted company. It seems on track to give bondholders a 75% haircut, has about 1.5 mn unfinished properties, and it’s share price in Hong Kong is down about 85% in the past year. In what analysts say is a naked grab for cash, it’s offering new homes for 25% off.

What happened? It took on tons of debt to turbocharge its growth — and the off-plan developer has since run afoul of new measures Beijing introduced to curb the total debt levels of property developers. That has forced it to offer units for sale at cut rates to clear out inventory and try to keep up with debt payments. Homebuyers and investors are now besieging the company’s headquarters.

What should you look for? Bloomberg says Evergrande won’t be able to meet interest payments past next week, and China’s Ministry of Housing and Urban-Rural Development seems to be brokering some kind of bid to restructure the company’s pile of debt.

Don’t expect Beijing to let it to bankrupt: The real estate sector in China accounts for nearly a third of GDP, and Xi Jinping’s ruling party is worried that if Evergrande goes down, it could set off a contagion that infects the vast banking sector that is bankrolling real estate developers. You can read more in Reuters, CNN, the Financial Times and the Guardian as well as the Sydney Morning Herald.

MORE CHINA- The latest in the world’s most intense love-hate relationship: US President Joe Biden has denied media reports that China’s Xi Jinping last week rejected Biden’s offer of a face-to-face meeting. Biden was said to have made the offer during a phone call on 10 September, their first since February, Reuters reports. Outlets such as the Financial Times and Bloomberg picked up the news, saying Xi asked the US leader to adopt a less strident tone toward Beijing. The official readout of the call issued by the White House last week made no mention of the alleged invitation.

SPEAKING OF SINO-AMERICAN RELATIONS- DC is agog at the latest in a string of reports that a top US general reassured the Chinese last fall that Washington wasn’t going to nuke them, regardless of Agent Orange’s rhetoric. Mark Milley, the four-star chairman of the Joint Chiefs of Staff, reportedly reached out to his Chinese counterpart to assure him that “that Trump would not attack China and that if Trump did decide to attack then Milley would give his Chinese counterpart a secret heads up.” Look for this story to have legs: Milley will appear before Congress at the end of this month to answer questions. Axios has the rundown.

Milley’s outreach to the ChiComs will be one of the centerpieces in Bob Woodward’s latest, Peril, co-authored with Robert Costa. The story is getting plenty of ink from CNN and the Washington Post.

Electric pickup trucks are now a thing: EV start-up Rivian released the first electric powered pickup truck to the consumer market, according to a tweet by the company founder. The launch puts Rivian ahead of competitors like Tesla and General Motors, with Tesla in 2019 giving a live demonstration of its Cybertruck and promising that it would go into production later this year — a date that has since been postponed to late 2022.

Developing countries may not be fairly represented at November’s COP26 climate conference: The conference seems like it will go on as planned despite fierce protest from global green groups, who say developing countries may struggle to attend, leaving a handful of rich countries to draw up climate plans for the rest of the world, the Financial Times reports. Last week, Greenpeace and over 1.5k other climate nonprofits called for COP26 to be postponed as many developing countries could struggle to attend due to covid-19 travel restrictions. The conference is due to take place in Glasgow from 1-12 November and has already been postponed for a year due to the pandemic.

This comes as nearly all nations fall far behind on goals set out by the Paris Climate Agreement, according to a report by the Climate Action Tracker, with the only country to achieve its goals being Gambia. Seven other countries, including the UK, were ranked as ‘almost sufficient’ in their promises to cut carbon pollution and policy changes. The US, the EU, Germany, and Japan’s efforts have been deemed ‘insufficient’, while Iran, Russia, Saudi Arabia are among the countries that are ‘critically insufficient’. The Associated Press picked up the story.

Companies are not doing their part either: A review of 107 major global companies found that more than 70% omitted whether they had considered climate risks when preparing their 2020 financial statements, according to research conducted by the Carbon Tracker Initiative and the Climate Accounting Project that was picked up by the FT. Meanwhile, the report also found inconsistencies in the majority of disclosures from companies that did mention climate, with auditors failing to note or question the discrepancies. From firms like Shell, BMW, Airbus, to auditors such as EY and PwC, corporations are shying away from addressing climate change and being transparent in their role in impacting the environment.

Everyone wants to be Dogecoin: The last thing the creators of Dogecoin expected was that their meme-inspired cryptocurrency — developed as a joke in 2013 — would vault into stardom and get recognition from the likes of Elon Musk. Maybe that’s why they didn’t immediately file for the dogecoin brand name until late August of this year. The filing now sits at the US Patent and Trademark Office next to a dozen similar claims to the name, from cryptos to firms selling baby blankets and men’s suits, writes the Wall Street Journal. Today there are almost 100 cryptocurrency tokens that use the ticker “doge,” and if Dogecoin is provided with a trademark, they can prevent and stop these other firms from creating products that could confuse users as to what brand is backing it.

This strikes many as ironic — and a bit hypocritical: Dogecoin itself was a spinoff created by tweaking several existing cryptocurrencies, including BTC, Luckycoin, and Litecoin. But now that they’ve propelled to the top, they seem to have forgotten how they initially started and are coming after like-minded, but late copycats.

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