1. The financial sector has been rocked by the news that four major Chinese wealth management firms under the umbrella of Zhongzhi Group have defaulted on their fixed-income products. The sheer volume of money involved and the number of related parties have led to an ongoing buzz in the Chinese market, while drawing much scrutiny from regulatory bodies toward the firm. Headquartered in Beijing, the business empire built by Zhongzhi Group and its subsidiaries covers finance, investment, wealth management, PE funds and trust companies, with nearly a trillion yuan (US $138 billion) in assets under management. Up to this point, senior executives from the Zhongzhi Group and related wealth management companies have repeatedly stated that the financial products are merely facing delayed payments and that they are actively raising funds for the pending redemptions. However, the market sentiment and various sources indicate severe payment delays. The liquidity crisis looming over the Zhongzhi Group seems to be hanging by a thread. This story is Caixin Global’s “Weekend Long Read” and it’s worth reading in full. (Source: caixinglobal.com)
2. After a short-lived sales rebound earlier this year, China’s property market has fallen back into a deep slump, developers are having more cash-flow problems and Chinese authorities are trying more ways to revive housing demand. Potential home buyers are expecting prices to fall and think better deals will emerge if they sit and wait. Real-estate agents in China and economists say home sales are declining again because Chinese citizens have come to expect more property-purchase subsidies from local governments, price cuts from developers and cheaper mortgages from banks. That is making the situation worse, because real-estate developers desperately need to sell more homes to bring in cash and avoid defaulting on debt. Country Garden, the country’s biggest surviving developer, said this past week that it is having liquidity problems after its apartment sales fell for four consecutive months. The company’s financial distress sent fresh tremors through the property market, which will likely further delay its recovery. (Source: wsj.com)
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