Finance

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U.S. stock futures dropped on Friday on renewed Covid fears over a new variant found in South Africa.
Futures for the Dow Jones Industrial Average fell 756 points, or 2.11%. S&P 500 futures lost 1.6% and Nasdaq 100 futures shed 0.9%. Friday is a shortened trading day because of the Thanksgiving holiday with U.S. markets closing at 1 p.m. ET.

The downward moves came after WHO officials on Thursday warned of a new Covid-19 variant that’s been detected in South Africa. The new variant contains more mutations to the spike protein, the component of the virus that binds to cells, than the highly contagious Delta variant. Because of these mutations, scientists fear it could have increased resistance to vaccines, though WHO said further investigation is needed.
The United Kingdom temporarily suspended flights from six African countries due to the variant. Israel barred travel to several nations after reporting one case in a traveler. Two cases were identified in Hong Kong.
“Friday is the day after Thanksgiving, probably not as many traders on the desks with an early close today. So potentially lower liquidity is causing some of the pullback,” Ajene Oden of BNY Mellon Investor Solutions said on CNBC’s “Squawk Box.” “But the reaction we’re seeing is a buying opportunity for investors. We have to think long-term.”
Bond prices rose and yields tumbled amid a flight to safety. The yield on the benchmark U.S. 10-year Treasury note fell 13 basis points to 1.511% (1 basis point equals 0.01%). This was a sharp reversal as yields jumped earlier in the week to above 1.68% at one point. Bond yields move inversely to prices.
Oil prices also tumbled, with U.S. crude futures down 6.2% to $73.57 per barrel, while the South African rand weakened 1.7% against the greenback to 16.231 per dollar.

Asia markets were hit hard in Friday trade, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng index both falling more than 2% each. Bitcoin fell 8%.
Travel-related stocks were hit hardest with Carnival Corp. and Royal Caribbean down more than 10% apiece in premarket trading. United Airlines, Delta Air Lines and American Airlines were each down more than 7%. Boeing lost 6%. Marriott International and Hilton Worldwide fell more than 5%.
Bank shares retreated on fears of the slowdown in economic activity and the retreat in rates. Bank of America, Goldman Sachs and Citigroup were each down more than 4%.
Industrials linked to the global economy declined led by Caterpillar off by 3%. Dow Inc. shed 2%.
Chevron dropped nearly 5% as energy stocks reacted to the rollover in crude prices.
On the flip side, investors huddled into the vaccine makers. Moderna shares gained more than 8%. Pfizer shares added 5%.
Some of the stay-at-home plays that gained in the earlier months of the pandemic were higher again. Zoom Video added 9%. Netflix was up 2%.
“I’m going to operate under the assumption that this is more transmissible, and that leads me to narrow my focus,” Greg Branch, managing partner at Veritas Financial Group, said on “Squawk Box.” He pointed to energy as an area that investors would avoid due to a potential drop-off in demand if the variant causes another wave of Covid.

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Markets were closed on Thursday for Thanksgiving, so stocks are coming off of slight gains on Wednesday that staunched the week’s losses for the S&P 500 and Nasdaq Composite. Trading volume tends to be light during holiday weeks.
A move higher in Treasury yields earlier this week put pressure on high-growth stocks. The Nasdaq is down 1.3% for the week, while the S&P 500 is up less than 0.1% and the Dow has gained roughly 0.6%.
The final weeks of the year are typically a strong period for the market, with the so-called Santa Claus rally usually creating a happy holidays for Wall Street. The S&P 500 is up 25% year to date.
Friday also marks the unofficial start of the holiday shopping season, as investors will be looking for insight from Black Friday to determine the mood of the U.S. consumer.
Retail stocks have seen dramatic moves in both directions during this earnings season. On Wednesday, shares of Gap and Nordstrom tanked more than 20%, but Kohl’s jumped more than 10% a week ago after reporting strong sales growth.
Retail executives spoke during the quarter about how they are managing supply chain issues and inflation. It also remains to be seen if discussion around supply chain issues caused consumers to start their holiday shopping early, potentially denting fourth-quarter sales.
“I would not be surprised if that was a dynamic around the holiday season,” said Sarah Henry, a portfolio manager at Logan Capital Management. She added that her firm was looking for companies with long-term strategic advantages than trying to bet on the best holiday sales results.
Wednesday also saw several strong economic reports, with personal incomes and consumer spending for October coming in higher than expected and initial jobless claims hitting their lowest level since 1969. However, Core PCE, the Fed’s preferred inflation gauge, remained elevated at 4.1%.
There are no major economic releases scheduled for Friday.

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A Delta airlines aircraft landing from Los Angeles at Kingsford Smith International airport on October 31, 2021 in Sydney, Australia.
James D. Morgan | Getty Images

Check out the companies making headlines before the bell Friday:
Travel and leisure stocks – Airline stocks are getting hit hard in the premarket by news of the new Covid-19 variant, including American (AAL), United (UAL), Southwest (LUV), Delta (DAL) and JetBlue (JBLU). Cruise stocks were also getting rocked: Royal Caribbean (RCL) slid 10.6%, Carnival (CCL) took a 10.5% hit, and Norwegian (NCLH) fell 10%.

Stay-at-home stocks – Stocks that benefited from Covid-19 closures rebounded, with Zoom Video (ZM) gaining 7.8% in premarket trading, DocuSign (DOCU) up 3%, Netflix (NFLX) higher by 2.2% and Peloton (PTON) jumping 6.2%.
Vaccine stocks – These are rising following the Covid variant news, with Moderna (MRNA) surging 8.6% in the premarket, Pfizer (PFE) jumping 5.6%, BioNTech (BNTX) surging 7.3% and Novavax (NVAX) rallying 5.3%.
Merck (MRK) – The drug maker and its partner, Ridgeback Biotherapeutics, said their experimental Covid pill cut the risk of death and hospitalization in at-risk patients by 30%. However, that was a lower efficacy rate than was seen in an earlier study, and Merck fell 3% in premarket trading.
Didi Global (DIDI) – Didi has been asked by Chinese regulators to delist from the New York Stock Exchange, according to a Bloomberg report. The request to delist the ride-haling company is said to come amid concerns about data security. Didi slid 6.3% in premarket action.
Tesla (TSLA) – Tesla will invest $188 million to expand production capacity at its Shanghai factory, according to the state-backed Beijing Daily newspaper. Tesla fell 2.3% in the premarket.

Micron Technology (MU) – Micron and Taiwan-based chip maker United Microelectronics (UMC) have withdrawn intellectual property complaints against each other. The two companies did not give a reason for ending those cases. Micron fell 1.6% in the premarket, while United Micro slid 2.3%.
Boeing (BA) – Boeing was told that its bid to sell fighter jets to Canada did not meet the government’s requirements, according to a report in the Canadian Press. The report said two other competitors, Lockheed Martin (LMT) and Sweden’s Saab, did meet those requirements and remain in the competition. Boeing lost 6.3% in premarket action.
Microsoft (MSFT) – Microsoft Chief Executive Officer Satya Nadella disclosed the sale of 839,000 shares in an SEC filing, leaving him with ownership of 831,000 shares following that transaction. Microsoft fell 1% in the premarket.
Pinduoduo (PDD) – The China-based e-commerce platform operator saw its shares plummet 17.7% in the premarket, after it reported quarterly revenue that was well below analyst estimates amid increasing competition from companies like Alibaba (BABA) and JD.com (JD).

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Celebrity investor Kevin O’Leary is investing in digital currencies, but he hasn’t done so lightly.
O’Leary said he liked the USD Coin, the world’s second-largest stablecoin run by Circle.
The “Shark Tank” investor said there was an opportunity for the U.S. to “lead the charge” with stablecoins. 

Kevin O’Leary
Scott Mlyn | CNBC

Celebrity investor Kevin O’Leary is investing in digital currencies, but he hasn’t done so lightly, telling CNBC that he’d prefer to consult with regulators on this space rather than be a “crypto cowboy.”
O’Leary told CNBC’s “Capital Connection” on Tuesday that he preferred to consult with regulators before investing in cryptocurrency, in order to see “what is possible and what isn’t” in terms of their stance on the space.

“I have zero interest in investing in litigation against the SEC [U.S. Securities and Exchange Commission], that is a very bad idea,” he said, in a discussion around the U.S. regulator’s case with fintech company Ripple.
The SEC’s case against Ripple is centered on its concerns about the fintech firm’s ties to XRP, the world’s seventh-biggest cryptocurrency. The SEC alleged that Ripple and its executives sold $1.3 billion worth of the tokens in an unregistered securities offering.
O’Leary, who is an investor on “Shark Tank” and chairman of O’Shares ETF, said that he preferred to accommodate and comply with regulators “because that’s where the real capital is.”
“I have no interest in being a crypto cowboy and getting anybody unhappy with me because … I have so many assets in the real world that I’ve invested in already that I have to be compliant,” he added.

Stablecoin

In terms of investing in digital cash pegged to national currencies, also known as “stablecoins,” O’Leary said he had no interest in holding the digital Russian ruble or Chinese yuan because he didn’t know enough about the country’s blockchain or how they were monitoring ownership of the money.

Instead, O’Leary believed the biggest opportunity for stablecoins remained with a currency tied to the U.S. dollar.
He acknowledged how that may sound “counterintuitive” considering the rise in inflation, as this decreases the buying power of the dollar.

However, O’Leary explained that he had been sitting on a “large amount of cash,” after selling a lot of his commercial property investments over the last couple of years, which would lose buying power because of inflation.
By comparison, O’Leary said that he could make a potential 6% return by buying into the USD Coin, which is the world’s second-largest stablecoin run by digital currency company Circle and is pegged to the U.S. dollar. Although O’Leary clarified that he could currently only invest up to 5% of his cash in USDC.
But he added that there was an opportunity for the U.S. to “lead the charge” with stablecoins. 

Crypto as ‘software development’

O’Leary said that he was in United Arab Emirates capital of Abu Dhabi, attending the city’s annual fintech festival, to also speak to the government and regulators to understand more about where the country stands on its rules for blockchain in finance.
He said that he didn’t consider cryptocurrencies, like bitcoin, “in the same way that other people do.”
O’Leary said he viewed it as “software development” and so, when he was looking to invest in the space, he wanted to understand which blockchain platform would “win long term.”
He named Solana, Polygon and HBAR as a few examples.
“I need to invest in all of those, not just one of them because I don’t know who the winner’s going to be,” he explained, adding that he was looking for which markets offered the best engineering talent and policy in the process.
O’Leary said that the U.S. currently didn’t have an exchange-traded fund that held bitcoin because the regulator was “taking its time” on blockchain regulation.
“That’s why I came here, I wanna hear from the regulator what the plan is so that I can be involved in this because I am going to every jurisdiction that is forward thinking about decentralized finance,” he said.
— CNBC’s Ryan Browne contributed to this report.

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While the plunge in Evergrande’s shares has abated, the volatility in other Chinese real estate companies has continued this month.
The consensus among economists is that the real estate slump is contained, since it’s driven by a top-down government decision to limit reliance on debt in the property industry.
Foreign investors say they are largely in the dark, rather than receiving timely corporate disclosures or clarity on policy.

Listings of apartments for sale displayed at a real estate office in Shanghai, China, on Monday, Aug. 30, 2021.
Qilai Shen | Bloomberg | Getty Images

BEIJING — Wild swings in Chinese real estate stocks and bonds are keeping investors on edge — these news headlines could cause troubles in the sector to spill into the rest of the economy, says S&P Global Ratings.
While the plunge in Evergrande’s shares has abated, the volatility in other Chinese real estate companies has continued this month.

On Thursday, Kaisa shares briefly popped 20% after news it could stave off default. On the same day, a Shanghai-traded bond from developer Shimao plunged 30%, reminiscent of a sharp sell-off in the company’s bonds earlier this month.
“Headlines can hit sentiment and drive contagion,” Charles Chang, senior director and Greater China country lead for corporate ratings at S&P Global Ratings, said in a report earlier this month.
The risk Chang laid out is that news reports about defaults, or even the potential for default, could scare away Chinese homebuyers. And that drying up of demand would put developers out of business, along with the construction companies and other suppliers that work with them.

The consensus among economists is that the real estate slump is contained, since it’s driven by a top-down government decision to limit reliance on debt in the property industry. The People’s Bank of China summed up this view in mid-October, calling Evergrande a unique case, and affirming the overall health of the property sector.
But investors have grown increasingly worried about how Beijing’s crackdown would actually play out. News of the default of a far smaller developer, Fantasia, and growing financing troubles among other developers, began to exacerbate a sharp sell-off.

I’m not quite certain the regulators and authorities understand the damage this does to the offshore market, because a lot of investors won’t return.

Jennifer James
Janus Henderson Investors

The Markit iBoxx index for China high yield real estate bonds is clinging to monthly gains after a volatile few weeks — including a drop of nearly 18% in October and an almost 11% fall in September.
“It’s a really trying time for investors right now, probably more for bond investors than equity investors, because what we’re really watching is a policy transition unfolding in real time,” Jennifer James, portfolio manager and lead emerging markets analyst of Janus Henderson Investors, told CNBC earlier this month.
Even worse for foreign institutional investors, typically more comfortable with detailed messaging from companies and policymakers, China’s system tends to rely more on broad government statements and cautious corporate disclosures.
This lack of clarity has been a longstanding issue with investing in China-related assets.

Investors left in the dark

Rather than companies making announcements during the worst of the sell-off earlier this month, James said she often learned about how they were doing through news reports, days or weeks later. These include meetings with the government.
“I’m not quite certain the regulators and authorities understand the damage this does to the offshore market, because a lot of investors won’t return,” said James.
The lack of clarity exacerbated the situation, research institute Rhodium Group pointed out in a note on Tuesday.
“The most significant policy signal was a non-signal: the absence of a clear decision on what concrete action to take to resolve Evergrande’s situation and stem contagion in the property sector,” said analysts at Rhodium Group.
“Officials underestimated the severity of contagion and systemic concern, made confusing pledges to prevent a full reckoning, and ultimately claimed that the initial policy disciplines that precipitated the property stress had been misinterpreted,” it said.
“If the government intended to build confidence in the direction of financial reform, the outcome has been the exact opposite,” they said.

For investors left in the dark, the ensuing anxiety meant they’d rather sell than stay invested.
“The problem is when you have a market impact that has gone far beyond what anyone would have reasonably expected at the beginning of October, you have to start asking, ‘What is the macro impact?'” Jim Veneau, head of fixed income, Asia at AXA Investment Managers, told CNBC earlier this month.
The potential macroeconomic consequences can be significant.
Real estate and industries related to it account for about a quarter of China’s economy.
Property accounts for the bulk of household wealth.
According to S&P, residential land accounts for 85% of local governments’ revenue from selling land.
Land sales to developers provide critical revenue for local governments since they can’t generate enough revenue from taxes to pay for all their expenses, according to Rhodium Group.
But developers will not want to buy as much land now, since negative investor sentiment makes it harder for the real estate companies to get financing. The business cycle for Chinese real estate companies relies heavily on sufficient financing for making sure consumers get the apartments they paid for ahead of completion.

Developers struggle to get financing

In contrast with other industries, Chinese developers relied far more on the offshore bond market that gave them access to foreign investors.
But that channel of financing began to dry up as negative sentiment around the real estate companies increased on the back of concerns that Evergrande — which owes more than $300 billion — might default.
The number of Chinese real estate high-yield bond deals plummeted in October to just two deals, worth a total of $352 million, according to Dealogic. That’s down from $1.62 billion for 9 deals in September, and a high of 29 deals worth $8.5 billion in January, the data showed.
Those tight financing conditions reflect a relatively challenging environment for property developers to get capital on the mainland as well.

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“A lot of easy things can happen through messaging,” James said. “Someone can come out and say: This is a very important part of our economy and we will always be supportive.”
But one of the latest messages from the People’s Bank of China was that the real estate market remains healthy overall.
As a result, Ting Lu, chief China economist at Nomura, is not expecting a change in the property curbs to come until at least the spring.
— CNBC’s Weizhen Tan contributed to this report.

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OF ALL AMERICA’S many job openings, this was the most important. On November 22nd President Joe Biden announced that he would renominate Jerome Powell as chairman of the Federal Reserve when his current term expires in February. After a drawn-out selection process, it was reassuring that Mr Biden at last made the obvious choice, opting for a steady pair of hands at a time of economic danger.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

TEN YEARS ago Chinese property was described as “the most important sector in the universe” by Jonathan Anderson, now of Emerging Advisors Group, a consultancy. Property was a big source of China’s growth, household spending and appetite for commodities, like iron ore. Today the sector has become a source of universal concern, as housing sales have dropped, developers have defaulted and the price of iron ore has tumbled. China-watchers are eager for a rigorous measure of the sector’s importance to the country’s economy. And in recent months, the world’s press has converged on a number: 29% of GDP.That estimate, which has been cited in this newspaper, the Financial Times, the Wall Street Journal, Bloomberg and elsewhere, comes from a paper by Kenneth Rogoff of Harvard and Yuanchen Yang of the IMF. Both economists have impeccable credentials. But their number (28.7%, to be precise) does not count what most people think it counts. The most prominent measure of the most important sector in the universe is widely misunderstood. So how should it be interpreted? To grasp it properly requires a gentle walk through the ins and outs of inputs and outputs.Imagine an economy that makes a house and nothing else. The house is the output of the construction industry. But to make it, builders require inputs. They need steel, which is the output of the metals industry. And the steel requires iron ore, the output of the mining industry. Assume these are all that is required. The house sells for $1m, the steel for $600,000 and the iron ore for $500,000. Now ask yourself, how important is the construction industry?One narrow answer is 40% of GDP. In making the house, builders add $400,000 to the value of the steel they buy. They therefore account for two-fifths of the home’s $1m value. Since the house represents the entirety of the economy’s GDP, a narrow measure of the construction industry’s importance is 40% of GDP.A broader answer is 100% of GDP. The house is the economy’s only “final” product. Everything else the economy makes is just an ingredient in that cake. The only reason to make ore is to make steel. And the only reason to make steel is to make houses. These “upstream” industries are therefore intimately linked to construction. If housing demand wavers, so will demand for steel and ore. So 100% of the demand for final products in this economy is demand for the things the construction industry makes.How would Mr Rogoff and Ms Yang measure the importance of property? Those who have not read their paper might assume their figure is similar in spirit to the first, narrow answer. They may think it refers to the value added by the property sector (which in their paper includes services like estate agents as well as developers). People who have glanced at the paper may assume their approach instead conforms to the broad answer. The property sector has tight links with upstream industries. Therefore its importance includes not just the value it adds, but also the value added by its upstream suppliers (of steel and other inputs) and their suppliers (of ore and other materials).In fact Mr Rogoff and Ms Yang do not exactly follow either approach. Applied to our simple economy, their method would yield an answer of $1.1m or 110% of GDP. It would count the iron ore ($500,000). It would also count the full value ($600,000) of the steel (even though that includes the value of the ore, an input to the input). But it would not count the $1m value of the house or even the $400,000 of value added by the construction industry.Why not? Their approach is an unusual attempt to correct for double-counting. If you were to add construction output (the $1m home), steel output ($600,000) and mining output ($500,000), you could be accused of double- or even triple-counting. You would have counted the steel twice and the ore three times (once on its own, a second time when it is embedded in the steel, and a third time when the steel is embedded in the home).The typical, intuitive way to avoid this problem is to count only the value that is added at each stage of production ($500,000 plus $100,000 plus $400,000 in our simple example). That method yields the “broad” answer of 100% of GDP in the one-house economy. The method employed by Mr Rogoff and Ms Yang includes some things not counted in this measure and excludes others that are. In the one-house economy their approach would count the steel once, the ore twice and the construction not at all. In the case of China’s economy, they argue, these inclusions and exclusions cancel out in practice. “The direct construction value added we did not include and the inputs of input we did include…are very similar in scale, and offset,” writes Ms Yang. “The alternative (perhaps more intuitive) approach does not change our message.”Steel yourselfIn a forthcoming comment on Mr Rogoff and Ms Yang’s paper, a team of economists at the Asian Development Bank (ADB) including Mahinthan Mariasingham and John Arvin Bernabe has taken the more intuitive approach, totting up the value added by construction and property services, as well as the value added by other industries in supplying them, and by the suppliers of their suppliers. Using the same numbers as Mr Rogoff and Ms Yang for real-estate investment and services (albeit for 2017 not 2016) they reckon that China’s property sector accounted for 15.4% of GDP in 2017. Excluding imports, the number fell to 13.8%.There is another wrinkle, however. The investment numbers used by Mr Rogoff and Ms Yang, and the ADB, may miss some buildings constructed by enterprises that are not officially classified as property developers. Including them, while using the more intuitive approach, increases the property sector’s importance to a little over 23% of GDP in 2018, according to Andrew Tilton and his team at Goldman Sachs. The sector remains of cosmic significance. But anyone alarmed by the 29% figure can rest about six percentage points easier. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “A universe of worry” More

JAMES MADDISON was sure he had scored. As his free kick arced over the wall of Arsenal players, a goal seemed certain. Somehow Arsenal’s goalkeeper, Aaron Ramsdale, got a hand to the ball and kept it out. “Best save I’ve seen for years,” said Peter Schmeichel, a former goalie. Others noted a crucial detail. Before the ball was struck, Mr Ramsdale was on his toes, his weight distributed evenly, ready to jump in either direction. By keeping perfectly balanced, he made a wonder-save possible.Balance (or the lack of it) matters in financial markets, just as in football. A market in which bets are slanted in one direction is vulnerable to a big swing in prices the opposite way. Where positions are lopsided traders can be wrong-footed by even a tiny change in sentiment or in the news. Some of the recent volatility in global bond markets can be put down to skewed positioning. When liquidity is patchy, as in today’s Treasury market, the results can be some surprisingly large shifts in bond yields.To understand all this, imagine you are pondering a trade. You notice that covid-19 infections are rising in Europe and that governments are imposing partial lockdowns. Meanwhile there are signs that America’s economy is picking up steam. You conclude that the Federal Reserve will have to raise interest rates sooner than people expect and a lot sooner than the European Central Bank. A way to profit from this analysis might be to sell the euro against the dollar.Before you go ahead, you would be wise to check how other traders are positioned. America’s Commodity Futures Trading Commission publishes regular reports on the positions of traders in currency futures and options. If, say, there were already a lot of euro shorts, you should feel less gung-ho. After all, if many traders have already sold the euro, there are fewer potential sellers to drive it down in the future. And there are perils when a lot of investors are betting one way. In the event of unexpected news that is positive for the euro, the speculators who are short the currency would be nursing losses. Some would be forced to buy back the euros they had sold. As more traders scrambled to cover their short positions, the euro would appreciate sharply. This is a classic “short squeeze” or “position washout”.That brings us to bond-market volatility. Inferring traders’ positions from bond futures is tricky, says Kit Juckes of Société Générale, a bank. The nature of finance is to borrow short and lend long. This “natural positioning” will tend to obscure other speculative bets, says Mr Juckes. Perhaps this is why a lot of the recent discussion of volatility has been focused on liquidity—how easy it is to get in or out of a position quickly. A report this month by a working group drawn from America’s Treasury, the Federal Reserve and other regulatory bodies provides an example. It blames evanescent liquidity for the dramatic jumps in bond yields in, for instance, March 2020 and in February this year. It puts this down to a change in market structure. New regulations in the aftermath of the global financial crisis of 2007-09 made it costlier for banks to hold large inventories of bonds to facilitate client trading. A small group of electronic high-frequency traders has since supplanted the banks. These firms keep the market super-liquid most of the time. But they are thinly capitalised, and cannot hold a lot of bonds for long. In volatile markets, they are forced to take less risk. So when liquidity is most needed, it tends to vanish.These and other changes in market structure have tended to make positions more extreme. Bond-buyers are less heterogeneous, says George Papamarkakis of North Asset Management. Funds are bigger. Information flows more quickly. And momentum trading, the buying of recent winners and selling of recent losers, is a more prevalent feature of bond markets. In the halcyon days before the financial crisis, there were marketmakers who were willing and able to lean against momentum, to take a view based on fundamentals, and to hold bonds for more than a day (or a few seconds). But not anymore. So positions become crowded. When a piece of news goes against a popular trade, the washout can be quite dramatic.A market that leans too far one way is eventually forced to reverse. In this regard, the bond market is like a goalkeeper who gambles on where a free kick is going. He shifts his weight to one side of the goal in anticipation. But he is often left flapping in despair as the ball heads for the other corner.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Full tilt” More

Kaisa’s Hong Kong-listed shares popped 20% in the market open, before paring some gains to close 13.86% higher. It was the first day of trading after a nearly three-week halt.
The developer had suspended trading after missing a payment on a wealth management product.
The company released plans for making payments on wealth management products, and U.S.-listed offshore debt originally due in December.

Kaisa Group Holdings Ltd.’s City Plaza development under construction in Shanghai, China, on Tuesday, Nov. 16, 2021.
Qilai Shen | Bloomberg | Getty Images

BEIJING — Chinese real estate developer Kaisa announced Thursday plans for paying back investors, temporarily alleviating concerns about a default as China’s property sector continues to face pressure.
Kaisa’s Hong Kong-listed shares popped 20% in the market open, before paring some gains to close 13.86% higher. It was the first day of trading after a nearly three-week halt. The developer had suspended trading after missing a payment on a wealth management product earlier this month.

“Repayment measures have been implemented” for about 1.1 billion yuan ($171.9 million) of the wealth management products, Kaisa said in a filing with the Hong Kong stock exchange. The developer said it’s in negotiations about repayment of the remaining 396.6 million yuan in wealth management products.
Separately, Kaisa said it would restructure offshore debt payments due in December by offering investors new bonds worth $380 million that are now due in 2023. The original U.S. dollar-denominated bonds were worth $400 million.

Among Chinese developers, Kaisa is the second-largest issuer of U.S. dollar-denominated offshore high-yield bonds, according to French investment bank Natixis. Evergrande, the world’s most indebted real estate developer, ranks first.
As of the first half of this year, Kaisa had crossed two of China’s three “red lines” for real estate developers that the government outlined, according to Natixis.
“Persistent tightening governmental policy, multiple credit events and deteriorating consumer sentiment have resulted in temporary shut-down of various refinancing venues for the sector and put enormous pressure on our short-term liquidity,” Kaisa said in a filing Thursday.
“Despite our efforts to reduce our interest-bearing debt in response to government regulations, the current sharp downturn in the financing environment has limited our funding sources to address the upcoming maturities,” the company said.

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