Hopefully under better circumstances next time. But you know this is an issue right now we're dealing with the mortgage
issue. Part of it is this how big of a problem is this. Well the mortgage boycotts. The biggest problem is that the track
headlines and a ways down sentiment which has been the central problem
faced by the sector. So in terms of size our bank team estimates that the total number amount of mortgages that could be affected
is about one trillion renminbi. Now that sounds like a big number. But China also has a very big banking system. So that's
about two and a half percent of all mortgages about zero point five percent of all loans. So it's not big enough to really cast
a big threat on the system and the banking system. But on the property side where is that. Is that problem in all of it really
all symptoms of it. Do you think that they're able to ring fence that. Well so as I mentioned before the problem is really the
broadcast effect. So they do need to address this problem and they need to
ease minds and make buyers more comfortable. Confidence right. Yes. Yes. So I think you know this is going to take a bit of
time to resolve. But in the meantime the government is looking into it and do seem to be paying quite a bit of attention to it
as it does occupy quite a lot of attention of the public. Do you think having state owned firms with bond guarantees and
what we've been hearing in terms of what could happen in terms of liquidity support does not do enough to turnaround the story
in any way. Charles are you still looking for more. From a credit as a credit agency.
Well the bottom line is that these guaranteed bonds is at most going to be an interim measure and it's just getting started. So
we're not really seeing that many developers benefiting from that as of yet. So it needs to come into shape come into form
probably in a much broader scale for that to to kind of reverse the sector's problems. And at the end of the day what's really
happening is that you know homebuyers are worried about buying homes. So that needs to. That needs to change. And before that
changes as sales continue to decline then the sector will continue to to be in trouble. So the developers getting into
better shape will help. Other measures could potentially help but that is the core problem.
Did you see any real sector or any sort of company that might be immune from this turmoil in the property sector right now. Or is
this something that you think even some of these better quality sort of names could also be impacted to.
Well the core problem being that homebuyers are worried about buying pre sold homes that won't get delivered. There are a
handful of developers that those worries are less pronounced. So some of the large robust. And many of them state owned firms
don't really face that problem. And perhaps some of the firms that are at the local level that hasn't racked up as much
leverage and didn't attract as many negative headlines and still have access to funding. Maybe they continue to operate. So I
think as it stands right now is very much buyers beware and homebuyers have a cloud of worry above them. But they still need
to buy homes. People still do need to buy property. And there's still demand for for quality housing. So the sector will
continue but under a much more sluggish state. Charles I guess the question there then becomes I mean it's a
question that bond markets have been trying to figure out the last twelve months. You know where do you draw the line. Right.
I mean country garden just as an example. Right. Who would have thought this one would be fit yesterday of course downgraded
that the junk would be in the same sort of pool as the others. And I guess the
question the pricing in this off year bond market almost everything looks distressed. Do you think it's justified right
now or is that also an overreaction you think. Well I think you'd large part they're probably justified under a
lot of developers that have defaulted. Many of them have been unable to access back bank funding as well as capital markets.
So they're going to have problems facing debt that's coming due especially since their sales the weaker ones especially have
dropped 60 to 70 percent year on year. So cash is basically not coming in whether from sales or from their funding sources. So
for for those names obviously they they are distressed and the prices should reflect that. But there are certain as I say just
a few developers that can withstand this and the prices reflect that too. So you know in the middle there could be a few that
could make their way out of it. But we're still kind of in the early days because we we do need to see income coming and we do
need to see sales recover and we do need to see sentiment stabilize. And that has a
kind of a virtuous cycle effect when it goes in that direction. Now it's rather vicious cycle but at some point I should turn.