The Day at a Glance | Aug 16 2022

The Top

*China plans to directly fund real-estate developers; state financial institutions guarantee the purchase of their bonds.

*Gazprom warns that natural gas prices in Europe could increase 60% towards winter.

*German manufacturers are facing difficulties finding work: Ifo.

*Japan´s economy grew 2.2% in the 2Q22 (0.5% quarterly).

*Permits and the construction of houses in the United States are decreasing to their lowest levels since the end of 2021.

*Putin accuses the US of prolonging the conflict in Ukraine.

*Economic indicators: Industrial production data will be made public (0.3%e. monthly).

Economic environment

Real-estate crisis in China. According to news reports, Chinese authorities are preparing to guarantee funding for real-estate companies and avoid a debt crisis in the sector. Reports have pointed out that authorities have met with companies to  offer guarantees of funding in local bond issuances. Through the state-owned credit company, China Bond Insurance Co., the government is committed to purchasing bonds to help fund real-estate companies that are going through a crisis due to a strong decrease in sales and little appetite investors have for their debt issuances. Lonfor, Seazen Group Ltd., CIFI, Country Garden and Gemdale Corp. are some of the first companies chosen to receive aid from authorities. This is another initiative on behalf of the government to try to back the industry, which is essential for China´s growth. Although the measure was well received by investors in the Chinese market – as it solves short-term liquidity issues that many companies are facing – the only real medium-term solution will come from a rebound in demand and an increase in the sector´s sales. It´s estimated that China´s real-estate crisis has wiped out 90 billion dollars in equity values and dollar denominated bonds this year alone.