Joe Mcdonald, The Associated Press
Published Wednesday, September 22, 2021 7:08AM EDT
Last Updated Wednesday, September 22, 2021 7:08AM EDT
BEIJING (AP) — A Chinese real estate developer whose struggle to avoid defaulting on billions of dollars of debt has rattled global markets says it will pay interest due Thursday to bondholders in China but gave no sign of plans to pay on a separate bond abroad.
The Chinese government, meanwhile, added to investor anxiety Wednesday by staying silent about whether it might intervene to restructure Evergrande Group’s $310 billion debt.
Evergrande’s struggle to comply with financial restrictions imposed by regulators to curb rising debt in the Chinese economy has prompted fears a default might cause global shockwaves. Economists say Beijing can prevent a Chinese credit crunch but wants to avoid appearing to arrange a bailout while it tries to force other companies to reduce reliance on debt.
Evergrande appears to be trying to buy time for “an orderly default rather than a shocking implosion” by paying bondholders in China on time while skipping payments abroad, said Vishnu Varathan of Mizuho Bank in a report.
“Averting a default altogether is highly unlikely,” Varathan said.
If regulators get involved, they are likely to focus on protecting families that paid for apartments that are yet to be built, economists say. That would cause bigger losses for banks, construction companies and other creditors.
Evergrande, which ratings agency S&P Global says is the world’s most-indebted real estate developer, said it will make a payment due on a 4 billion yuan ($620 million) bond denominated in Chinese yuan.
A company statement said details were “settled in negotiations outside the market” but gave no indication whether that meant any change in the payment. The bond has a 5.8% interest rate, which would make the normal amount due 232 million yuan ($36 million) for one year.
Evergrande did not say if it would make a separate payment of $83 million due Thursday to holders of a U.S. dollar-denominated bond that matures in March.
Evergrande appears to be favoring Chinese creditors in order to negotiate with a circle of friendly banks and other institutions that hold its debt, said Mizuho’s Varathan. He said that “optimizes relief from creditor action” in China.
A default on a bond in China would trigger a cross-default on a bond abroad but missing a payment abroad doesn’t have the same effect with in China, according Varathan. He said it would be harder to renegotiate with a “diverse and dispersed” investor pool abroad.
China’s main stock market benchmark, the Shanghai Composite Index, closed 0.4% higher following the announcement. Hong Kong financial markets, which have been jolted by Evergrande’s predicament, were closed for a holiday.
Some commentators suggest Evergrande might become China’s “Lehman moment,” referring to the failure of Wall Street bank Lehman Brothers, a forerunner to the 2008 crisis. But economists say the risk of global market contagion is low.
Evergrande has sold billions of dollars of assets to pay down debt since regulators tightened limits on borrowing by China’s real estate industry last year. The company is one of China’s biggest private sector conglomerates, with more than 200,000 employees, 1,300 projects in 280 cities and assets worth 2.3 trillion yuan ($350 billion).
Its billionaire founder, Xu Jiayin, expressed confidence in a letter to employees this week that the company will quickly resolve its debt problems.
Other major developers such as Vanke Co., state-owned Poly Group and Wanda Group have not reported similar problems. But hundreds of smaller developers have shut down since regulators in 2017 started tightening control over fundraising tactics such as selling apartments before construction begins.
The ruling party has declared reducing debt and financial risks a priority since 2018. But total corporate, government and household borrowing rose to nearly 300% of economic output last year from 270% in 2018, unusually high for a middle-income country.
As of June 30, Evergrande reported 2 trillion yuan ($310 billion) of outstanding debts to bondholders, banks, construction contractors and other creditors.
Of that debt, 240 billion yuan ($37.3 billion) was due within a year, nearly triple Evergrande’s 86.8 billion yuan ($13.5 billion) in cash holdings, according to a company financial report.
Beijing allowed the first corporate bond default of the communist era in 2014 in an effort to force borrowers and lenders to be more disciplined. Defaults by private sector borrowers have gradually been allowed to increase, but the government has arranged bailouts for state-owned companies.
Dollar set for another week of losses even as Fed tapering looms
The dollar was heading for a second week of declines on Friday as sentiment stayed tilted towards riskier assets, while an intervention by the Australian central bank put a halt to the Aussie dollar’s recent surge.
The dollar index was last at 93.733, little changed in Asian hours but off 0.24% on the week, as it continues its fall from a 12-month high of 94.565 hit in earlier this month.
It had managed to stem losses on Thursday, bouncing on better U.S. jobs and housing data, but the rally petered out on Friday morning in Asia, where risk sentiment was boosted news that beleaguered developer China Evergrande Group has supplied funds to pay interest on a U.S. dollar bond, averting a default.
But traders are still trying to assess whether the dollar has scope to fall further, or if this is a temporary blip on a march higher.
“People are wondering whether we are at an inflection point, as the dollar has been weakening and that doesn’t really fit with the broader narrative that global growth is cooling and the Fed is on the path to tapering, which should be supportive for the dollar,” said Paul Mackel, global head of FX research at HSBC.
On Friday, benchmark 10-year U.S. Treasury yields were at 1.6872%, slightly off from Thursday’s multi-month high of 1.7%, as markets continue to prepare themselves for an announcement by the Federal Reserve that it will start to wind down its massive bond buying programme, which is widely expected for November.
Mackel said part of the reason for the dollar’s weakness had been strong performances by currencies from most commodity exporting countries.
These were quieter on Friday, however, as traders took profits, analysts said, and energy prices softened.
Brent crude, which had risen above $86 dollars a barrel on Thursday, continued its tumble and was last at $84.10.
The Australian dollar was at $0.7475, off Thursday’s three-month top, as the boost to the China-exposed currency from Evergrande’s news was outweighed by action from the Reserve Bank of Australia to stem a bond sell off, as well as the pause in energy price rises.
The RBA said on Friday it had stepped in to defend its yield target for the first time in eight months, spending A$1 billion ($750 million) to dampen an aggressive bonds sell-off as traders have bet on inflation pulling forward rate hikes.
Also affected by energy prices, the Canadian dollar slipped to C$1.2352 per U.S. dollar, off Thursday’s C$1.2287, a level last seen in June.
The British pound paused for breath at $1.3798, off a month peak hit earlier in the week, to which it had been carried by growing expectations of an interest rate hike to combat rising inflationary pressures.
The euro was little changed at $1.1627, while the yen wobbled within sight of its multi-year lows, with one dollar worth 114.01 yen, compared with 114.69 earlier in the week, a four-year low.
China’s yuan eased against the dollar on Friday after the FX regulator warned of possible action if the currency market is hit by greater volatility following its recent rally. But the yuan still looked set for the biggest weekly gain since May.
Bitcoin was at $63,928, a little off Wednesday’s all-time high of $67,016
(Reporting by Alun John; Editing by Sam Holmes and Kim Coghill)
Pandemic opens doors to switch jobs in Japan, but pay not rising much
The Covid-19 pandemic has unexpectedly helped Japan’s nursing homes and Information Technology companies overcome years of labour shortages, as job cuts at restaurants and hotels have prompted workers to look for new careers.
This newfound job mobility marks a shift in a country whose rigid labour practices are partially blamed for a long term decline in productivity.
But it is too soon to say whether the change will ultimately lead to higher wages, which are desperately needed to revive demand and growth in an economy that is still struggling to break free from decades of deflation.
For now, the job-hoppers tend to trade one low-paying career for another.
Toshiki Kurimata, who used to make 2.8 million yen ($25,000) a year as a masseur, quit after 12 years as the pandemic caused a sharp drop in customers. Now he works at a nursing care centre and is taking classes to become a registered caregiver.
With that qualification, he expects to earn around 3.3 million yen – an increase of about 18%. The even bigger attraction, he says, is job stability.
“I like working in nursing care and it’s stable,” Kurimata said. “There aren’t age limits on the work and you can find work even if, like me, you are inexperienced.”
Experts aren’t sure whether the job-switching will remain limited to certain industries or become a broader trend.
It is also uncertain whether job switching will continue once the pandemic dies down, although anecdotal evidence suggests people will keep leaving food-service jobs for nursing and IT.
Japan expects to have a shortage of 690,000 care workers by 2040, a tough gap to fill given the rapidly ageing population.
OECD data put Japan’s hourly labour productivity at $47.9, making it about 60% of the United States’ level, the worst among the Group of Seven (G7) advanced economies, and 21st
among the 37 OECD members as of 2019.
And the prospect of people being stuck in low income jobs poses a big challenge for Japan’s new Prime Minister Fumio Kishida, who has pledged to bring more wealth to households via higher wages.
“COVID-19 fallouts are pushing low-paid workers into even harder situations with little, or no, increase in pay,” said Hisashi Yamada, senior economist at Japan Research Institute.
Hospitality businesses have laid off workers, with the number of employees falling to 3.9 million in 2020 from the prior year’s 4.2 million, labour ministry data shows.
By contrast, the medical and health industry saw employees hitting 8.6 million, up 200,000 from 2019. The IT sector hired 2.4 million employees, up 100,000 from 2019.
Vocational training schools have benefited.
SAMURAI, which offers IT training, had 1.7 times more students enrolled as of April 2021 compared with a year earlier, as employees retrenched during the pandemic rushed to retrain.
Most IT jobs on offer for inexperienced workers are for programmers, on the lowest rung of the IT ladder, but they generally still pay more than can be earned in hospitality.
The average annual salary for employees at restaurants and nursing homes amounts to roughly 3 million yen, 30% less than an average Japanese workers’ salary, government data shows. IT programmers earn close to the national average.
“I saw how popular the IT sector was and thought I may land a stable job,” said Koki Shimizu, a 22-year-student at SAMURAI who lost his job as a chef and now is learning to program.
At Crie, which offers training in nursing care, classes that were only two-thirds full before the pandemic are now packed out.
The company’s head Takayuki Nakayama expects the uptrend to continue given steady job offers in the nursing care industry.
“It’s true wages are relatively low in the nursing-care industry. But many job-seekers want stability after seeing the damage inflicted on eateries and other service-sector firms.”
Retailers are also becoming alarmed over losing staff, as they are counting on a rebound in activity as Japan gradually eases COVID-19 restrictions.
Major Japanese pub chain operator Watami is scrambling to hire 100 mid-career staff this year – something it has not done for three years – and it reckons that eventually it may have to pay more.
“1,000 yen per hour may not be enough, 1,500 yen may be needed to attract workers in the future,” said the company’s chief executive Miki Watanabe.
For now, firms are wary of raising pay as the economy is still struggling in the wake of the pandemic.
($1 = 114.0100 yen)
(Reporting by Tetsushi Kajimoto; Editing by Leika Kihara, David Dolan & Simon Cameron-Moore)
Pfizer-BioNTech report high efficacy of COVID boosters in study – Al Jazeera English
The companies say phase III trial data show booster shot of COVID-19 vaccine was 95.6 percent effective against the disease.
American pharmaceutical company Pfizer and its partner BioNTech have said data from a Phase III trial demonstrated high efficacy of a booster dose of their COVID-19 vaccine against the coronavirus, including the Delta variant.
They said a trial of 10,000 participants aged 16 or older showed 95.6 percent effectiveness against the disease, during a period when the Delta strain was prevalent.
The study also found that the booster shot had a favourable safety profile.
Pfizer had said its two-shot vaccine’s efficacy drops over time, citing a study that showed 84 percent effectiveness from a peak of 96 percent four months after a second dose. Some countries had already gone ahead with plans to give booster doses.
The drugmakers said the median time between the second dose and the booster shot or the placebo in the study was about 11 months, adding that there were only five cases of COVID-19 in the booster group, compared with 109 cases in the group which received the placebo shot.
“These results provide further evidence of the benefits of boosters as we aim to keep people well-protected against this disease,” Pfizer CEO Albert Bourla said in a statement.
The median age of the participants was 53 years, with 55.5 percent of participants between 16 and 55 years, and 23.3 percent at 65 years or older.
The companies said they would submit detailed results of the trial for peer-reviewed publication to the US Food and Drug Administration (FDA), the European Medicines Agency, and other regulatory agencies as soon as possible.
The US and European regulators have already authorised a third dose of COVID-19 vaccines by Pfizer-BioNTech and Moderna Inc for patients with compromised immune systems who are likely to have weaker protection from the two-dose regimens.
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