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China Evergrande bondholders receive overdue bond coupon payments – source

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Several bondholders of China Evergrande Group have received coupon payments from the indebted property developer, a source with knowledge of the matter said on Thursday, easing concerns about a potentially destabilising default.

Chinese media outlet Cailianshe earlier reported several bondholders have received interest payments of the three bond tranches that had a total of more than $148 million in interest payments due last month but which had a grace period that ended Wednesday.

The source declined to be named because they were not authorised to speak to media. Evergrande did not respond to request for comment.

Evergrande, the world’s most indebted developer, has been stumbling from deadline to deadline in recent weeks as it grapples with more than $300 billion in liabilities, $19 billion of which are international market bonds.

A failure to pay would have resulted in a formal default by the company and trigger cross-default provisions for other Evergrande dollar bonds, exacerbating a debt crisis looming over the world’s second-largest economy.

Shares of Evergrande listed in Hong Kong jumped over 9% by mid-morning on relief the latest deadline was met.

The company, which also has coupon payments totalling more than $255 million due on Dec. 28, has come under pressure from a liquidity crisis that has weighed on the sector and threatens hundreds of projects.

The market is also watching rival Kaisa Group, which has coupon payments totalling over $59 million due on Thursday and Friday. Kaisa has the most offshore debt of any Chinese developer after Evergrande.

Kaisa, which has missed a payment on a wealth management product, was downgraded by S&P to “CCC-” from “CCC+” with a negative outlook on Thursday, following a similar action by Moody’s.

The rating agency said Kaisa’s liquidity appears to be depleted, and it expects a default scenario is inevitable within the next six months.

China’s property woes have rattled global markets since September despite Beijing’s efforts to reassure markets the crisis would not be allowed to spiral out of control.

Regulators and government think tanks have held meetings with developers in the past few weeks, and the market is expecting some easing in credit and housing policies to prevent a hard landing of the sector.

 

(Editing by Lincoln Feast.)

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Bank of Canada signals worries about inflation, but keeps rate on hold – Financial Post

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If not for worries about inflation, Canada’s outlook would be almost entirely positive, though the floods in British Columbia and the new COVID-19 variant certainly raise questions about the immediate future, and “could weigh on growth by compounding supply chain disruptions and reducing demand for some services,” the Bank of Canada said.

Still, the economic impact could be fleeting. The destruction caused by the floods will reduce gross domestic product in the fourth quarter, but rebuilding efforts will provide a temporary GDP jolt in the first half of next year. Pfizer Inc. and BioNTech SE on Dec. 8 said trials suggest a third dose of their vaccine will neutralize Omicron, giving a lift to global financial markets, since the news provided a reminder that science and economies have become progressively better at adapting to new waves of COVID-19 infections.

Regardless, Canada’s economy will be confronting those headwinds at full throttle. Exports surged 6.4 per cent in October from September, to a record $56.1 billion, according to Statistics Canada on Dec. 7. The trade data followed more evidence that the country’s labour market is well on its way to the “complete” recovery Macklem has said he wants to orchestrate.

Statistics Canada on Dec. 3 said employers added 154,000 positions last month, pushing employment to where it would have been if the trend in February 2020 hadn’t been interrupted by the COVID-19 crisis. The jobless rate plunged to six per cent, a level some economists associate with full employment, a theoretical condition where everyone who wants a job has one, and additional hiring would put upward pressure on inflation.

“Recent economic indicators suggest the economy had considerable momentum into the fourth quarter,” the central bank said. “This includes broad-based job gains in recent months that have brought the employment rate essentially back to its pre-pandemic level. Job vacancies remain elevated and wage growth has also picked up.”

Mounting evidence that the recovery from the pandemic recession is secure will allow policy-makers to shift their attention to prices. A year ago, the worry was deflation, which is why the central bank dropped its benchmark interest rate to 0.25 per cent and began creating billions of dollars per week to purchase government bonds, an aggressive form of monetary policy called quantitative easing (QE). The strategy successfully staved off disinflationary forces, but timing the return to normalcy was always going to be difficult.

The Bank of Canada began by slowly tapering its bond purchases before abruptly ending the program in October as year-over-year changes in the CPI approached five per cent, well in excess of the central bank’s target of about two per cent.

Macklem, who took over from Stephen Poloz in June 2020, wasn’t around for the most intense phase of the pandemic. His contribution was to make an explicit promise to keep the benchmark interest rate near zero until at least the second half of 2022, unusual clarity for a central bank meant to give businesses and households confidence they could borrow at low rates for an extended period.

But as growth picked up, it became clear the economy wouldn’t require interest rates at an emergency setting for such a lengthy period of time. At the same time the Bank of Canada ended QE in October, it also advanced the timeline for raising interest rates by three months, rewriting the official guidance to state that increases would likely start at some point during the middle two quarters of 2022.

Macklem and his deputies repeated that commitment on Dec. 8 almost word for word. The value of the Canadian dollar fell, suggesting investors were disappointed the Bank of Canada didn’t open the door to raising rates sooner than the second quarter. “We will provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation target,” the central bank reiterated in its new statement.

Saying more would have been difficult without a new economic forecast. The Bank of Canada has made a point of tying its guidance to its quarterly outlooks; specifically, its estimate of when GDP will reach the level policy-makers associate with “full capacity,” which is essentially the maximum output policy-makers think the economy can generate without stoking inflation.

The most recent revisions prompted the October pivot, and the central bank won’t update its forecasts again until late January. The next three interest-rate announcements are scheduled for Jan. 24, March 2 and April 13. Most Bay Street economists assume the first interest-rate increase will come in April, but that will depend on the forecast the central bank generates when it runs the numbers a month from now.

“We think there’s risk that the economy reaches full capacity even sooner given rapid improvement in the labour market,” said Josh Nye, an economist at Royal Bank of Canada. “The BoC was held back by Omicron uncertainty, but today’s statement suggests that as long as that risk doesn’t intensify in the next seven weeks, the BoC will sound more hawkish in January.”

• Email: kcarmichael@postmedia.com | Twitter: carmichaelkevin

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Dollarama beats profit estimates on Halloween spending boost

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Dollarama Inc beat Wall Street expectations for quarterly profit on Wednesday as the discount store operator benefited from strong demand for its higher-margin seasonal products, such as Halloween decorations and candy.

Customers have started spending on decor and party supplies as a majority of the Canadian population is vaccinated, allowing get-togethers and social events to take place.

Total sales rose to C$1.12 billion ($887.76 million) in the quarter, from C$1.06 billion a year earlier, Dollarama said.

The company’s net income rose to C$183.4 million, or 61 Canadian cents per share, in the quarter ended Oct. 31, from C$161.9 million, or 52 Canadian cents per share a year earlier.

Analysts were expecting the company to earn 57 Canadian cents per share, according to Refinitiv IBES data.

($1 = 1.2616 Canadian dollars)

 

(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Amy Caren Daniel)

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Bank of Canada keeps key interest rate on hold – CTV News

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OTTAWA –

Canada’s central bank has sent a warning that increases in the cost of living would continue into next year, but signalled it wasn’t yet prepared to pull its key lever to rein in inflation.

The annual pace of inflation in October rose to 4.7 per cent, a pandemic-era high and the fastest year-over-year gain in the consumer price index in 18 years.

The Bank of Canada said high inflation rates will continue through the first half of next year, but should by the second half of 2022 fall back to its comfort zone of between one and three per cent.

By the end of next year, the bank is forecasting the annual inflation rate to fall to 2.1 per cent.

While the path for inflation and the economy are largely following the central bank’s expectations, the statement released Wednesday said the bank “is closely watching inflation expectations and labour costs” to make sure they don’t take off and cause a spiral of price growth.

The comments in the last scheduled rate announcement of the year left the key rate at its rock-bottom level of 0.25 per cent, unchanged from where it was in January at the onset of the COVID-19 pandemic.

The announcement also said that the bank doesn’t expect to raise the trendsetting rate until some time between April and September next year, which is unchanged from its previous guidance.

“Overall, the (Bank of Canada) did indeed resist spitting in anyone’s holiday ‘nog,” Derek Holt, head of capital markets economics at Scotiabank, wrote in a note. “They stayed on track with guidance to begin entertaining rate hikes as soon as next April.”

When the bank moves, it is likely to move fast and furious, said BMO chief economist Douglas Porter. The bank has a history of quickly raising rates from emergency levels, he said, suggesting four rate hikes by the end of 2022.

“When the Bank of Canada believes that interest rates need to go up, they don’t tend to wait around, they tend to move relatively quickly,” Porter said.

The bank said the economy appears to have “considerable momentum” heading to the end of the year after growing at an annualized rate of 5.4 per cent in the third quarter of the year, a hair below what the Bank of Canada forecasted in October.

The Bank of Canada’s statement noted that the quarterly growth brought total economic activity to within about 1.5 per cent of where it was in the last quarter of 2019, before COVID-19 washed upon Canada’s shores.

Similarly, the labour market had a stronger-than-expected showing in November, pushing the share of core-age workers with a job to an all-time high and leaving the unemployment rate 0.3 percentage points above its pre-pandemic level in February 2020.

Still, the bank notes headwinds from devastating floods in British Columbia and uncertainties from the Omicron variant that could throw another wrench into snarled supply chains, and scare off consumers from spending on services.

TD senior economist Sri Thanabalasingam said the bank may move sooner on rates if Omicron proves to be less of a health concern than initially feared, noting the economy can handle it “with inflation running hot, and the labour market on solid footing.”

A rise in rates would impact interest charged for variable rate mortgages, which could tighten the finances of households that over the course of 2021 have added $121.5 billion in mortgage debt, including $38 billion between July and September.

“It’s going to be, I think, particularly problematic for Canadians who have gone into fairly substantial mortgages, particularly when interest rates have been low for such a long period of time,” said Tashia Batstone, president of FP Canada, a financial-planning association.

“What that means is you have to work harder to stick to your budget, you have to be watching the debt that you’re taking on, and in particular watch that you may not be able to have the flexibility around mortgage loans.”

This report by The Canadian Press was first published Dec. 8, 2021.

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