Finance

Billions in FTX customer and investor money is tied up in an ongoing bankruptcy process.
Some who have lost millions of dollars tell CNBC they haven’t lost faith in the industry and are cashing out through other means in order to reinvest in crypto.
“I’m in quite a big hole right now,” says one customer. “I’m probably going to have to file for bankruptcy.

FTX’s multibillion-dollar cryptocurrency blowup hasn’t destroyed all faith in the industry. 
In a new documentary premiering Monday, FTX customers, insiders and investors tell CNBC that despite not receiving a single dollar worth of cryptocurrency back, they’re optimistic on the industry and plan to keep investing. 

Evan Luthra, an app developer, entrepreneur and angel investor, told CNBC he lost $2 million dollars in the collapse of FTX. Luthra said he knew when FTX filed for bankruptcy in late 2022 that he wouldn’t have “access to any of this money for the next few years.” He continues to speak at crypto conferences

FTX Customer, Evan Luthra, spoke to CNBC in Miami before speaking at a crypto conference.

“I do want everybody to understand that the mistake here was not bitcoin, the mistake was not crypto,” Luthra said. “The fundamental reason why we buy bitcoin, why we use bitcoin has not changed.” 
Luthra said his hefty loss on FTX hasn’t shaken his bitcoin bullishness.
“I know it’s going to end up at over $100,000 sooner or later anyways, so for me it’s a great buy,” he said. Bitcoin is currently trading at about $26,900, down from a high of about $69,000 in December 2021.
“All the success is made in the trenches, not when everybody’s already celebrating,” he said. 

FTX, once one of the largest cryptocurrency exchanges in the world, spiraled into bankruptcy after its swift collapse last year. Shortly after, FTX investigators said they discovered $8.9 billion dollars in customer assets were missing from the exchange.
FTX founder and ex-CEO Sam Bankman-Fried faces seven criminal charges for fraud and violating campaign finance violations. He’s pleaded not guilty to all charges. Jury selection begins in Manhattan on Tuesday.

FTX Founder Sam Bankman-Fried leaves from Manhattan Federal Court after court appearance in New York, United States on June 15, 2023.
Fatih Aktas | Anadolu Agency | Getty Images

At a bankruptcy hearing in April 2022, an attorney for FTX said $7.3 billion dollars in cash and liquid crypto assets had been recovered from the exchange. So far, none of the customers interviewed by CNBC have received any of their money back. 
Jake Thacker, an FTX customer in Portland, Oregon, told CNBC he lost hundreds of thousands of dollars shortly after losing his job in the tech industry.
“I’m in quite a big hole right now,” Thacker said. “I’m probably going to have to file for bankruptcy.”

FTX customer, Jake Thacker spoke with CNBC after losing hundreds of thousands of dollars on the exchange.

Thacker told CNBC he “would encourage people to still invest in crypto.” 
“I probably would give them some different advice at this point,” he said. That advice would come with the warning, “Here’s what I learned, don’t make the same mistakes I did.” 
Bhagamshi Kannegundla said he first heard about FTX in an advertisement featuring comedian Larry David that aired during the Super Bowl. 
“I was like, oh my goodness, there’s all these big name people utilizing FTX,” Kannegundla said. “So I was like, OK, hey, I think I’ll be safe using this.”
Less than a year later, Kannegundla was out $174,000, representing around 60% of his crypto portfolio, from FTX’s collapsed.

Bhagamshi Kannegundla, an FTX customer, told CNBC he sold his bankruptcy claim to reinvest in crypto.

“Based on all the other bankruptcies and everything that happened in the crypto market, I was really, really worried about getting anything back, and then how long I would have to wait,” Kannegundla said.
Instead of waiting for the recoveries to eventually be distributed to FTX customers,  Kannegundla went online and found a company that would help him sell his bankruptcy claim for pennies on the dollar to get a little bit of cash more quickly.
Kannegundla said his bankruptcy claim was for $174,000. He received around $19,000 in the sale. 
“The buyer was, after all the due diligence and everything, it went down to like 11% of the $174,000,” he said.
Years later, if the FTX bankruptcy process recovers more than the 11 cents on the dollar for his claim, the buyer pockets the difference. Kannegundla said he will have “zero regrets” if that money gets recovered because he has a different strategy.
“I wanted to get the cash from the bankruptcy claim, primarily to invest in crypto again,” he said. “I felt as if there was a good chance for me to make money in the next five to 10 years.” 
Kannegundla understands that it may be an odd choice.
“People might think I’m crazy for this,” he said. “After going through the FTX and all these other bankruptcies, why would you want to buy any more crypto?” 
He rationalized his decision. 
“When you believe in something as far as technology, you will go through it, you know, it’s kind of like the same person who bought like, let’s say Amazon stock,” he said. 
Another FTX customer, Sunil Kavuri, who has a background in traditional finance, said he moved his digital assets from rival exchange Binance to FTX because he believed it was a safe place for his money. He pointed to the fact that the company raised money from top venture capital firms Sequoia and Paradigm.  
“I thought OK, this is a very safe, institutionally backed exchange,” he said.

Bahamas-based crypto exchange FTX filed for bankruptcy in the U.S. on Nov. 11, 2022, seeking court protection as it looks for a way to return money to users.
Nurphoto | Nurphoto | Getty Images

In an email to CNBC, Kavuri said he hasn’t purchased any crypto since the collapse of FTX because he “wanted to take a break from suffering a massive loss.” Over the last 10 months, he said the majority of his time has been spent fighting “for the rights of all FTX users that lost money due to the FTX bankruptcy.” 
“It hasn’t shaken my faith in the underlying asset itself,” Kavuri said. “I think cryptocurrencies generally, it should be here to stay.”

FTX Customer, Sunil Kavuri spoke with CNBC about his multi-million dollar loss after the exchange filed for bankruptcy.

Across the industry, crypto still has its believers despite the madness of 2022.
Brett Harrison, the former President of FTX’s U.S. business, said he was blindsided by his parent company’s collapse. But he’s doubling down on cryptocurrencies.
Harrison, who left FTX less than two months before its demise, told CNBC he “had no reason to suspect that FTX wasn’t anything other than extremely profitable and in great shape” prior to his departure.

Brett Harrison, the Former President of FTX US left the company less than two months before it’s collapse.

Speaking about his plan to move forward, Harrison said he’s been raising money to start a new company in the space called Architect Financial Technologies. 
“I’d really like to build a technology and a tech-forward brokerage that allows people to trade seamlessly and easily in digital assets and any kind of other tokenized products in addition to other asset classes,” Harrison said. 
Anthony Scaramucci, founder of Skybridge Capital, said he felt like he was late to the game. He didn’t make his first bitcoin investment until October 2020. He later started Skybridge to focus on digital assets. 

Anthony Scaramucci, the founder of Skybridge Capital, spoke with CNBC at his office in New York.

Scaramucci told CNBC he “was building a close relationship with Bankman-Fried” and felt “betrayed and disappointed” when FTX collapsed after making a $10 million dollar investment in the exchange’s FTT token.
He said he still sees “a very strong bull case for Web 3,” referring to broad technologies surrounding crypto and the prospective future of a distributed internet.
“You got to be patient” he said. “If you’re going to go through a period of fraud, and fraudsters and over leverage, you have to see it to the other side.” More

IF GLOBAL WARMING is to be limited, the world must forget about fossil fuels as fast as possible—that much almost everyone agrees upon. How to do so is the complicated part. Economists have long favoured putting a price on carbon, a mechanism that Europe introduced in 2005. Doing so allows the market to identify the cheapest unit of greenhouse gas to cut, and thus society to fight climate change at the lowest possible cost. Others, including many American politicians, worry that such schemes will provoke a backlash by raising consumer costs. Under President Joe Biden, America is instead doling out hundreds of billions of dollars to nurture green supply chains.Yet, remarkably, the rest of the world is now beginning to look more European—with carbon prices spreading in countries both rich and poor. Take Indonesia, the world’s ninth-biggest polluter. Although it releases 620m tonnes of carbon-dioxide equivalent a year, with almost half its soaring energy consumption coming from coal, the country has green ambitions. On September 26th, at the launch of its first carbon market, Joko Widodo, the president, talked up its prospects as a hub for the carbon trade, and local banks duly snapped up credits from a geothermal-energy firm. The country also introduced a local emissions-trading scheme in February, which requires large coal-fired plants to buy permits for emissions above a threshold.image: The EconomistIn short, even in countries better known as polluters than as green leaders, things are shifting. By the start of 2023, 23% of the world’s emissions were covered by a carbon price, according to the World Bank, up from just 5% in 2010 (see chart). The spread will only accelerate over the coming years as more countries come around to the advantages of carbon pricing, and existing schemes expand their reach. On October 1st the EU launched a groundbreaking policy under a dreary name. The “carbon border adjustment mechanism” (CBAM) will, by 2026, start to levy a carbon price on all the bloc’s imports, meaning that European companies will have a strong incentive to push suppliers around the world to go green.The spread of carbon prices is happening in three ways. First, governments are creating new markets and levies. Indonesia is one example. If all goes to plan, its market will eventually be combined with a carbon tax. In April Japan launched a voluntary national market for carbon offsets, which will work alongside an existing regional cap-and-trade policy in place in Tokyo. Participants, accounting for 40% or so of the country’s pollution, will be required to disclose and set emissions targets. Over time the scheme will become stricter, with auctions of carbon allowances for the energy industry due to begin in 2033. Meanwhile, Vietnam is working on an emissions-trading scheme to be established in 2028, in which firms with emissions above a threshold will need to offset them by buying credits.Second, countries with more established markets are beefing up their policies. On September 24th China’s National Climate Strategy Centre announced that its emissions-trading scheme, which is the world’s largest, will move from only focusing on the carbon intensity of coal power plants, to focusing on both their intensity and total emissions. The scheme will be linked with a dormant carbon-credit market, allowing plants to meet their obligations by purchasing credits for renewable power, planting forests or restoring mangroves. Australia, which scrapped its original carbon price in 2014, has reformed a previously toothless scheme known as the “safeguard mechanism”. Since July large industrial facilities that account for 28% of the country’s emissions have had to reduce emissions by 4.9% a year against a baseline. Those that fail must buy carbon offsets, which trade at a price of around $20 a tonne.The final way in which carbon markets are spreading is through cross-border schemes. The EU’s programme is by far the most advanced. In CBAM’s pilot phase importers of aluminium, cement, electricity, fertiliser, hydrogen, iron and steel will need to report “embodied” emissions (those generated through production and transport). Then, from 2026, importers will have to pay a levy equivalent to the difference between the carbon cost of these embodied emissions in the EU’s scheme and any carbon price paid by the exporter in their domestic market. Free permits for sectors will also be phased out, and the housing and transport industries will be brought into the market.Many of these schemes will take time to have an impact. Lots in Asia are flimsy, with prices set too low to produce meaningful change—well below the EU’s current price of €80-90 ($85-95), which is itself only approaching climate economists’ estimate of the social cost of carbon. For instance, half the coal plants covered by China’s emissions-trading scheme face a negative carbon price, meaning that they are in effect paid to burn the dirty fuel, since their emission intensity is below the national average, says Lauri Myllyvirta of the Centre for Research on Energy and Clean Air, a think-tank. The scheme also fails to create an incentive to shift from coal to other sources of power, he notes.Across the world, activists criticise the ability of firms to use offsets to indulge in what they term “greenwashing”, where companies falsely present themselves as environmentally friendly. Some schemes also struggle to prove they have led to emissions reductions. In 2022 a team of academics, led by Andrew Macintosh of Australian National University, argued that reforestation used as carbon credits in Australia’s scheme either did not happen or would have happened irrespective of payments for offsets. An independent review has since recommended changes to how the scheme works.Yet even carbon-pricing programmes that are limited will still help change behaviour, for the simple reason that they encourage the monitoring of emissions. After its launch two years ago, China’s emissions-trading scheme was dogged by fraud, with consultants alleged to have helped firms produce fake coal samples. A crackdown was announced by officials earlier this year, who are now satisfied with the quality of data. Despite the absence of a carbon price, American firms also face incentives to monitor emissions. President Biden has proposed a rule that all businesses selling to the federal government must disclose their emissions and have plans to reduce them. Many large firms have set voluntary net-zero targets as part of their marketing efforts. Apple, the world’s largest, has pledged to make its supply chain entirely carbon neutral by 2030.And manufacturers around the world now face a still greater incentive to accurately track their carbon footprints: CBAM. The EU’s ultimate goal is to tackle “carbon leakage”. Before CBAM’s introduction, Europe’s carbon price meant that domestic industries faced an extra cost compared with those in countries with less ambitious decarbonisation plans. This gave importers an incentive to source material from abroad, even if these inputs were dirtier. To compensate for this, the EU handed out permits to industrial producers. These will now be phased out as CBAM is phased in.During the pilot phase, CBAM simply presents an extra hurdle (what economists call a “non-tariff barrier”) for exporters to the bloc. To comply, European firms must report the embodied emissions of their imports. If such data do not exist, importers must use reference values provided by the EU. In order to nudge foreign companies to change their behaviour and prove that their emissions are lower, these are based on the emissions of the dirtiest firms in the bloc. From 2026 importers will have to pay the difference between the amount embodied emissions would be charged under the EU’s emissions-trading scheme and whatever carbon price the products pay at home.Carbon border tariffs may themselves multiply over the coming years. In Australia the government recently announced a review into the country’s “carbon leakage”, which will examine such an option. In 2021 America and the EU paused a trade dispute, begun by President Donald Trump, by starting negotiations over a “Global Arrangement on Sustainable Steel and Aluminium”. America wants the two trading partners to establish a common external tariff on more polluting steel producers. Since America does not have a domestic carbon price, such a policy would flout the rules of the World Trade Organisation. But if the EU and America do not come to an agreement, the Trump-era tariffs and the EU’s retaliatory measures will be reinstated.There is a domino effect to carbon pricing. Once an industry is subject to a carbon price its businesses will naturally want their competitors to face the same rules. Therefore owners of coal power plants will lobby to ensure that gas power plants operate on a level playing-field. Governments in exporting countries also have an incentive to ensure that their domestic firms pay a carbon price at home rather than a tariff abroad. If Asia’s factories are pressed to reduce their emissions anyway by schemes such as CBAM, then its governments are leaving money on the table by not levying a carbon price of their own.The question is whether the dominoes will fall fast enough. Almost no emissions-trading schemes are aimed at emissions from residential property or cars, for instance, where consumers would really feel the pain. In choosing to introduce carbon-pricing schemes, and then to make them broader and more muscular, policymakers have most economists firmly on their side—and are proceeding much faster than is commonly realised. But future policymakers will need to make such policies even more intrusive if the effects of climate change are to be minimised. For that to happen, they will have to win over voters, too. ■ More

Bill Ackman, Pershing Square Capital Management CEO, speaking at the Delivering Alpha conference in NYC on Sept. 28th, 2023.
Adam Jeffery | CNBC

Billionaire investor Bill Ackman said Friday that U.S. regulators have approved his unique special purpose acquisition company structure, and he’s ready to hunt for a deal.
Investors in Ackman’s unfruitful SPAC, known as Pershing Square Tontine Holdings, got a tradable right to participate in a future deal, and now it’s closer to becoming a reality. The Securities and Exchange Commission greenlit what the Pershing Square CEO has called a SPARC — a special purpose acquisition rights company — in which he will inform investors of the potential acquisition before they pledge funds.

“If your large private growth company wants to go public without the risks and expenses of a typical IPO, with Pershing Square as your anchor shareholder, please call me,” Ackman said in a post on X, formerly known as Twitter. “We promise a quick yes or no.”
Many have said the traditional SPAC structure can be inefficient and costly to shareholders. SPACs are shell corporations listed on a stock exchange with the purpose of acquiring a private company and taking the company public, typically within two years. In Ackman’s SPARC, investors get to opt in if they like the deal and walk away if they don’t.
The SPARC will shortly be distributing special purpose acquisition rights at no cost to former securityholders of Pershing Square Tontine. Ackman had raised $4 billion in the biggest-ever SPAC, but he returned the sum to investors after failing to find a suitable target company to take public.
After a hot period in the pandemic, SPAC investors have turned their backs on speculative high-growth equities with unproven track records after many of these firms failed to meet inflated forecasts. As interest rates stabilize, the market, as well as IPOs, have showed signs of rebound.
Pershing Square said the SPARC will immediately begin to pursue a merger with private, high-quality, growth companies. It is targeting companies who seek to raise a minimum of $1.5 billion of capital, the company said.
Ackman’s Pershing Square funds could commit a minimum of $250 million and up to $3.5 billion as anchor investors in the potential transaction, the company said. More

Tesla CEO Elon Musk arrives for a U.S. Senate bipartisan Artificial Intelligence Insight Forum at the U.S. Capitol in Washington, D.C., on Sept. 13, 2023.
Andrew Caballero-Reynolds | AFP | Getty Images

Check out the companies making headlines in midday trading.
Tesla — Stock in the electric vehicle company added 1.5% in midday trading Friday. Canaccord Genuity reiterated a buy rating on the EV stock on Thursday ahead of vehicle deliveries data. Elsewhere, Citi remained neutral on Tesla and reduced its vehicle delivery forecast to 450,000 from 468,500. Last week, Barclays forecast a delivery target miss.

Anheuser-Busch InBev — U.S.-listed shares of the beer stock climbed 3.2% following an upgrade to buy from neutral, with the firm highlighting an inflection point for margins and a more innovative portfolio strategy.
Carnival — Shares of the cruise operator slid 4.9% in midday trading. Carnival forecast a loss of 10 cents to 18 cents per share for the fiscal fourth quarter, while analysts polled by LSEG, formerly known as Refinitiv, anticipated a loss of 10 cents per share. Separately, Carnival posted adjusted earnings of 86 cents per share on revenue of $6.85 billion for the fiscal third quarter, beating earnings estimates of 75 cents per share and $6.69 billion in revenue. Competitor Norwegian Cruise Line also slipped 3%.
Blue Apron — Shares surged more than 134% after the meal kit company announced it reached an agreement to be bought by Wonder Group for $13 per share. That’s about a 137% premium to Blue Apron’s closing price of $5.49 per share on Thursday.
Nvidia — Shares of the chipmaker ticked up 1%. Citi wrote in a Friday note that the company’s forthcoming iteration of its Blackwell B100 GPU would serve as a “major stock catalyst” heading into the first half of 2024, and also drive margins and sales. The firm reiterated a buy rating on Nvidia stock.
Nike — Shares of the sneaker giant jumped 6.6% after a mixed fiscal first-quarter report. Late Thursday, the company reported earnings of 94 cents per share and $12.94 billion in revenue, while analysts polled by LSEG forecast 75 cents per share and $12.98 million in revenue. Nike also reiterated midsingle-digit full-year revenue growth guidance.

Walgreens — Shares of the pharmacy giant jumped more than 6%. Bloomberg, citing people familiar with the matter, reported Walgreens is weighing Tim Wentworth, a former Cigna executive, as its next CEO. Roz Brewer stepped down from her post as Walgreens CEO as of the end of August.
Bumble — The online dating platform added 3% after Loop Capital Markets upgraded the stock to buy from hold. The firm said the stock is “de-risked” while Bumble’s strong cash balance and free cash flow generation will help protect its balance sheet.
Brinker International — The Chili’s parent advanced nearly 2% following a Stifel upgrade to buy from hold. The firm said Brinker’s strategic playbook appears similar to those of other chains that have experienced successful turnarounds.
Corcept Therapeutics — Shares slumped 17% in midday trading as the firm contends with ongoing litigation against Teva Pharmaceuticals. The conflict centers on Corcept’s Cushing syndrome drug Korlym, and Teva has sought to cancel Corcept’s patent over the treatment.
Texas Roadhouse — Stock in the restaurant chain gained roughly 1% on the heels of an upgrade to buy from Northcoast Research, with the firm highlighting a steady flow of customer traffic to stores.
— CNBC’s Pia Singh, Alex Harring, Michelle Fox, Hakyung Kim and Darla Mercado contributed reporting. More

Citigroup, the third-largest U.S. bank by assets, has been monitoring its credit card customers for signs of distress, CEO Jane Fraser said.
“We are paying attention to the lower FICO consumer, where there are cracks” forming, Fraser told CNBC, referring to the widely used credit-scoring system from Fair Isaac Corp.
The scope of job cuts and expense savings triggered by the bank’s recent reorganization will be disclosed with fourth-quarter earnings, the CEO said.

Lower-end consumers have shifted buying patterns to save money as their bank accounts dwindle in size, according to Citigroup CEO Jane Fraser.
The third-largest U.S. bank by assets has been monitoring its credit card customers for signs of distress, Fraser told CNBC’s Sara Eisen on Friday in an interview.

“We are paying attention to the lower FICO consumer, where there are cracks” forming, Fraser said, referring to the widely used credit-scoring system from Fair Isaac Corp. “I think some of the excess savings from the Covid years are getting close to depletion.”
The U.S. government injected trillions of dollars into households and businesses during the pandemic to avert disaster, money that has helped keep the economy humming for longer than many forecasters expected. At the same time, the Federal Reserve’s most aggressive interest rate hiking cycle in four decades has made credit card, mortgage and auto debt more expensive, and late payments and defaults have been climbing.
When asked what other CEOs are telling her about the state of the economy, Fraser said that besides comments on artificial intelligence and labor tightness, corporate leaders have told her that demand is softening, she said.
“Particularly [for] the bottom end of the consumer, that’s the one that we’re starting to see cracks, you’re seeing some shift in the buying patterns to lower categories in the spend,” Fraser said. “It’s a resilient consumer, but it’s a softer one.”
Softening demand may help the Fed in its battle with inflation, the CEO noted. While employment and gross domestic product figures suggest the economy will achieve a “soft landing,” if it does tip into recession, it will likely be a “manageable” one, Fraser said.

In the wide-ranging interview, Citi’s CEO also said her latest overhaul of the bank was a move away from the “financial supermarket” model of the past into a more streamlined operation.
The scope of job cuts and expense savings triggered by the reorganization will be disclosed with fourth quarter-earnings, she said. More

Black Friday shoppers wait to enter the Nike store at the Opry Mills Mall in Nashville, Tennessee, on November 25, 2022.
Seth Herald | AFP | Getty Images

Check out the companies making headlines in premarket trading.
Nike — The sneaker behemoth added nearly 10% in premarket trading after a mixed earnings report. The company reported 94 cents per share and $12.94 billion in revenue, while analysts polled by LSEG forecast 75 cents and $12.98 million, respectively. Nike also reiterated mid-single digit full-year revenue growth guidance.

Uranium Energy — The uranium miner added 2% after the company said its fiscal full-year revenue came in at Revenue $164.4 million, dwarfing the $23.2 million seen a year ago. Uranium Energy lost 1 cent per share in the year on a GAAP basis, marking a turn after earning 2 cents per share in the prior year.
Blue Apron — Shares of the meal kit company jumped more than 100% in premarket trading after Blue Apron announced that it had reached a deal to be acquired by Wonder Group for $13 per share. Blue Apron’s stock closed at $5.49 per share on Thursday, with a market cap below $50 million.
Anheuser-Busch InBev — Shares of the beer maker gained 3.9% in premarket trading after Bank of America upgraded the company to buy from neutral and said it is approaching a margins inflection point.
Brinker International — The Chili’s parent climbed 4% after Stifel upgraded the stock to buy from hold. Stifel said Brinker’s strategic playbook appears similar to those of Olive Garden, Popeyes and KFC, which all saw successful turnarounds.
Editas Medicine — The genome editing company popped 9% in premarket trading following a Stifel upgrade to buy from hold. The firm said investors may be overly negative when looking at the total addressable market.

Ball — Shares added 1.7% in premarket trading after the aluminum-can maker was upgraded by Jeffries to buy from hold. The Wall Street firm said fundamentals have bottomed, free cash flow is accelerating and the business is resilient in a recession.
Bumble — The dating application stock climbed 4.1% after an upgrade to buy from Loop Capital Markets. The firm said the stock is “de-risked,” while Bumble’s strong cash balance and free cash flow generation will help protect its balance sheet.
Texas Roadhouse — The restaurant chain advanced 1.6% after Northcoast Research raised its rating to a buy. Northcoast said the company has kept traffic up more than expected and has fundamentals outperforming its current valuation.
— CNBC’s Brian Evans, Pia Singh, Jesse Pound and Michelle Fox contributed reporting More

The months ahead are set to bring more clarity on China’s economic outlook and any government support — especially for real estate.
“Probably in half a year, we are going to see the housing market stabilize,” Yao Yang, dean of the National School of Development at Peking University in Beijing, told reporters in a briefing Wednesday.
In coming weeks, China’s ruling Communist Party is also due to hold its Third Plenum, a meeting held once every five years which typically focuses on longer-term aspects of the economy.

This photo taken on September 24, 2023, shows residential buildings in Chongqing, in southwest China.
Stringer | Afp | Getty Images

BEIJING — The last three months of the year are set to bring more clarity on China’s economic outlook and any government support — especially for the critical real estate sector.
China’s rebound this year from Covid-19 has slowed since April. Then over the summer, the property slump accelerated, despite many large cities easing restrictions for buying apartments.

“Gradually, the central government is going to loosen up on the supply side, too,” Yao Yang, dean of the National School of Development at Peking University, told reporters in a briefing Wednesday.
“Probably in half a year, we are going to see the housing market stabilize,” he said, noting regulators were previously “overshooting” in their real estate crackdown.
At its peak, China’s property sector accounted for about a quarter of the economy, which means the industry’s struggles have weighed on everything from consumption to local government finances.

Yao also expects the central government to allow local governments to borrow more money to pay back their long-term debt — which he said can help the economy recover fully by the middle of next year.
In 2020, Beijing tried to rein in real estate developers’ high reliance on debt with new restrictions on financing. Covid restrictions dampened homebuyer appetite, drying up an important source of cash for developers since apartments are typically sold ahead of completion in China.

Developers delayed construction on projects, further worrying homebuyers. By late 2022, several real estate giants had defaulted on their debt. This summer, top leadership started to signal a new tone.
“The decline in the real estate sector was the result of the government’s intentional measures to correct the bubbles in the market,” Yao said. He noted that floor space sold this year will likely be more than 500 million square meters less than what it was before the crackdown — and 200 million square meters less than what’s considered acceptable for the industry.
But he and other economists mostly don’t expect real estate to return to significant growth in the future.
Dan Wang, Shanghai-based chief economist at Hang Seng China, said she expects housing market weakness will persist and prices to fall in the coming years, but not abruptly.
Her analysis found an unofficial minimum price for sales of newly built homes across China. “Some developers would say they sort of know the baseline, they cannot give a discount of 15%,” she said.
“For [the] Chinese government, they would like to see more of a controlled decline rather than a sudden adjustment,” she said, noting significant social consequences if house prices plunge, since much of household wealth is stored in housing.

The combination of these measures could allow the economy to rebound modestly from 4Q23 onward.

Morgan Stanley

This week, worries about China’s real estate sector persisted with highly indebted Evergrande running into more liquidity problems — along with reports Wednesday its chairman has been put under surveillance.
“A breakthrough on Evergrande’s restructuring, yeah it’s going to make a difference,” Clifford Lau, portfolio manager at William Blair, said in a phone interview Monday.
“But is it going to re-price the entire bond sector to high single-digit[s], to 20 cents to a dollar? I think that is a very long journey.”

Gloomy sentiment

Such headlines have weighed on sentiment, both domestically and among international investors. Some longtime China watchers, especially outside the country, have said they are confused about Beijing’s economic policies. Foreign businesses have grown pessimistic.
“When we talk about confidence, most of businesses live in today. They want to get by today. No one cares about 10 years after,” said Yao, who is also director of the China Center for Economic Research.
“So the lack of confidence is the same thing as slowing down of the Chinese economy. If the economy is slowing down, no one is going to have an optimistic view about the economy [any]where,” he said.
Yao has been a long and early proponent of handing out cash to some people in China to boost consumption. While some cities have done so, central government authorities have been hesitant, preferring to cut taxes, especially for businesses.

Policy meetings ahead

Lack of formal communication is not helping sentiment.
China’s tightly controlled system means that policy changes can typically only occur after major meetings of top leadership known as the Politburo. Those generally occur in late April and late July, and another meeting in December to discuss the year ahead.

Read more about China from CNBC Pro

In the coming weeks, China’s ruling Communist Party is due to hold its Third Plenum, a meeting held once every five years which typically focuses on longer term aspects of the economy.
“A central-government-led, comprehensive plan to resolve local debt risk may be unveiled before/at the Third Plenum this fall. The combination of these measures could allow the economy to rebound modestly from 4Q23 onward,” Robin Xing, chief China economist at Morgan Stanley, and a team said in a note.
Also widely anticipated is the National Financial Work Conference, a meeting to discuss financial development and risks. It has been delayed since it was originally expected to be held last year.
The meetings are part of a structure China has had for years. What’s different is that more recently, policymakers have become less likely to make major announcements before high-level directives are clear.
The Communist Party of China is also gaining increased oversight of finance and tech with the establishment of new commissions — a reorganization process announced in March and expected to take effect by the end of the year.

Is organic growth enough?

It’s not clear how much more policymakers need to do for the economy, especially since there’s still modest growth.
In the long term, Yao expects China’s GDP has the potential to grow by 5.5% a year, supported by a high savings rate and the country’s leadership in new energy vehicles, renewables and advanced technology.
This month, weekly data from Nomura indicate the real estate sales slump has moderated. Retail sales also grew better-than-expected in August and industrial profits for the month surged by 17.2% from a year ago.
Bruce Pang, chief economist and head of research for Greater China at JLL, pointed out that industrial profits rose regardless of company type.
What’s needed is “policy stability, not policy overshoot,” he said in Mandarin, according to a CNBC translation.
Pang doesn’t expect major policy changes at meetings later this year, but anticipates the central bank will continue to lower interest rates and growth to pick up naturally.

Even with a number of lowered China growth forecasts this year, economists’ expectations are close to, or slightly lower than, the official target of around 5%. Nomura on Wednesday increased its full-year GDP forecast to 4.8% from 4.6%.
“I guess every couple of years, you hear these stories about something. Trust companies, shadow banking was supposed to take the country down back in 2013. Didn’t happen,” said Peter Alexander, founder of Shanghai-based consulting firm Z-Ben. He said he arrived in China in 1996, at around the Asian financial crisis.
“Somehow, someway,” he said, “policy has entered to be able to provide some form of corrective action that has stabilized, or at a minimum, postponed the supposed inevitable.” More

The Trimble logo is displayed on a smartphone.
Igor Golovniov | SOPA Images | LightRocket | Getty Images

Check out the companies making headlines in midday trading.
Trimble — The technology services provider jumped 6.5% Thursday on the back of an announcement that AGCO Corporation will acquire an 85% stake in Trimble’s agribusiness for $2 billion in cash, as the tractor and seeding equipment firm looks to grow its precision agriculture portfolio.

DigitalBridge — Shares of the digital infrastructure company added 4.8% after JPMorgan upgraded the company to overweight from neutral. The firm said DigitalBridge is largely finished with the transformation of its business.
Jefferies Financial Group — The financial services stock rose 1.9% even though the company’s third-quarter profits were hurt by a slowdown in deal-making. After the market closed Wednesday, Jefferies posted earnings of 22 cents per share on revenue of $1.18 billion. Still, the company’s CEO expressed optimism that momentum in investment banking activity will return.
Duolingo — Shares gained 3.2% on Thursday after UBS initiated coverage of Duolingo the day prior with a buy rating, saying it’s a “best-in-class brand.”
Host Hotels & Resorts — Shares gained 3.5% after Wolfe Research initiated coverage of the real estate investment trust with an outperform rating. The firm assigned a $22 price target on the company. 
Workday — Shares plunged 8.5% a day after the cloud services company lowered its long-term subscription growth target to a range of 17% to 19%, compared to its previous target of 20%.

Accenture — Shares of the IT and consulting firm fell 4.3% Thursday after Accenture reported mixed results for its fiscal fourth quarter. The company reported $2.71 in adjusted earnings per share on $15.99 billion of revenue. Analysts were expecting $2.65 per share on $16.07 billion of revenue, according to FactSet. The company’s full-year guidance for the upcoming fiscal year for earnings and cash from operations also came in below expectations, according to StreetAccount.
Micron — The chipmaker’s shares fell 4.4% a day after Micron posted a weaker-than-expected earnings forecast. Micron estimates a fiscal first-quarter loss of $1.07 per share, while analysts polled by LSEG, formerly known as Refinitiv, expected a loss of 95 cents. For the fiscal fourth quarter, the company reported a narrower-than-expected loss as well as revenue that topped expectations.
Peloton — Peloton popped 5.4% Thursday. Peloton and Lululemon announced a five-year strategic partnership on Wednesday. As part of the deal, Peloton’s content will be available on Lululemon’s exercise app and Lululemon, in turn, will become Peloton’s primary athletic apparel partner.
CarMax — Shares fell 13.4%. The used-car retailer’s fiscal second-quarter earnings and revenue slipped from a year ago on weakening demand for used cars. The company said it earned 75 cents per share on revenue of $7.07 billion, and that it bought 14.9% fewer vehicles from consumers and dealers from the previous year as steep market depreciation hurt volume. 
Concentrix — Shares gained 6.8% a day after Concentrix said it would hike its quarterly dividend 10% to about 30 cents a share. Separately, the consumer experience tech company posted adjusted earnings of $2.71 per share on revenue of $1.63 billion, while analysts polled by FactSet had estimated Concentrix would earn $2.85 per share and revenue of $1.64 billion.
— CNBC’s Jesse Pound and Christina Cheddar-Berk contributed reporting. More