KeNo's Housing and Economic Portal: Wednesday July 15 Housing and Economic stories

TOP STORIES:

Zeroing in on empty homes, China throws developers a lifeline - (www.reuters.com) Dismayed by the millions of unsold homes in China's troubled real estate market, the Chinese government is taking matters into its own hands: by buying some properties and turning them into public housing. Like a white knight riding to the rescue of distressed developers, a handful of local governments are snapping up thousands of empty homes at hefty discounts and re-selling them to the country's poorest households. This cannot be a cure-all for China's huge supply overhang. At the end of May, according to the National Bureau of Statistics, unsold residential floor space totaled 657 square kilometers - the most unsold space in at least two years, and covering an area nearly the size of Singapore. Still, the policy getting tested in at least six provinces looks like a win for all. Low-income households gain from a bigger supply of subsidized homes, the government boosts its poverty alleviation work, developers deplete an oversupply of houses that has dampened prices, and crucially, China's cooling economy gets a fillip from a healthier property market.

Chinese Share Sell-off Spills Over to Hong Kong - (www.nytimes.com) Heavy government-coordinated purchases pushed up the value of large companies’ shares on mainland Chinese stock exchanges on Monday, interrupting at least temporarily a three-week downturn. But shares in smaller and midsize companies, which make up as much as two-thirds of the market by value, kept falling. A widening gap between the relative strength of large companies’ shares and the seemingly unending slide in the rest of the market threatens to widen social divisions in China. Millions of working- and middle-class families invested their life’s savings and borrowed heavily over the past year to buy shares in smaller companies, simply because the shares kept rising and almost regardless of the companies’ financial fundamentals. By contrast, Chinese and foreign institutional investors heavily favored the larger companies. Many of the large companies are partially owned by the state, and their executives are senior Communist Party officials who wield considerable political influence. Some large companies also have close ties to some of the country’s leading political families.

Greece ‘48 Hours Away From Unrest’ - (www.bloomberg.com) Greek Prime Minister Alexis Tsipras probably has 48 hours to resolve a standoff with creditors before civil unrest breaks out and ATMs run out of cash, hedge fund Balyasny Asset Management said. Fund managers are questioning how the International Monetary Fund and Europe’s leaders can seal a deal with Athens following the “no” vote in a Greek referendum on Sunday. Sixty-one percent of voters rejected austerity, increasing the likelihood of an exit from the euro area. “I don’t see a good resolution any time soon,” Colin Lancaster, senior managing director with Balyasny, a $9 billion fund based in Chicago, said in an e-mailed response to questions. “The big question is whether the EU adopts a strategy of waiting them out. The hope would be that the unrest leads to a unity government or change in government.”

China’s Stock Plunge Leaves Market More Leveraged Than Ever - (www.bloomberg.com) Leveraged bets on Chinese stocks have increased to a record versus the size of the market as prices fall faster than margin traders cut positions. The outstanding balance of margin loans on the Shanghai and Shenzhen bourses climbed to 4.4 percent of overall market capitalization on July 2 from 3.6 percent on June 12, before the rout began, as the attached chart shows. The data doesn’t include unregulated borrowing, which Bocom International Holdings Co. estimates at around $322 billion. That would increase the debt to market cap ratio to more than 9 percent. Higher leverage may undermine government measures to stem the steepest three-week rout in the nation’s equities in a quarter-century. Margin traders reduced positions for nine days through Thursday, the longest stretch of declines on record, even as the central bank cut interest rates and the securities regulator eased margin-trading rules.

Greek Bonds Drop to Records After Voters Reject Creditor Demands - (www.bloomberg.com) Measures of Greek debt risk from government bonds to corporate notes surged after voters rejected bailout terms demanded by international creditors. The government’s two-year notes fell to the lowest since they were sold via banks last July, with the sovereign yield curve indicating the highest risk of a default since the country restructured debt in 2012. Bonds sold by Greek banks and companies dropped to all-time lows as broader risk measures rose. Greece’s creditors turned up the heat on Prime Minister Alexis Tsipras to come up with a plan to stay in the 19-nation euro zone after 61 percent of voters endorsed his call for a “no” to more austerity in Sunday’s referendum. Greece’s departure from the euro is now the most probable scenario, according to a series of banks including JPMorgan Chase & Co. “Grexit is now more likely,” said Marius Daheim, a senior rates strategist at SEB AB in Frankfurt. “The EU cannot improve its offer any more. In particular, I see no leeway regarding the core issue of debt relief.”

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