[CC may contain inaccuracies] So in terms of that one payment made just in time there's another one due soon. We can assume somehow they'll make it
again. But to what extent does this reassure investors particularly bond holders that this matter is going to be
resolved in a way that doesn't mean some kind of default complete meltdown of ever grand.
Yes. Well so we have not thought of ever gratin as a human event. However I think this on payment
became more apparent after they were able to successfully negotiate an extension of one of the private loans of what was
called a jumbo fortune. And then following that they also did pay the coupon of the renminbi bond. So it wasn't entirely a
surprise although when it was first announced that they would pay this last U.S. dollar bond coupon the bonds initially had a
bit of a pop and then sort of very quickly came back down to almost unchanged on the day. Which I think tells you what the
market implies. As you know the potential recovery value of the U.S. dollar bond which may or may not be treated differently
it's very unclear how the restructuring ultimately will become. I think that it may made sense for them to pay this just pretty
much a day before the end of the grace period in order to kick the can down the road while they figure out a comprehensive
resolution to this this whole saga. You know I think that what is clear for us right now is we haven't had enough precedents to
reassure the market onshore and offshore will be treated equally well. And fortunately there have been that many incidents to set
the precedents right. What will though this this ultimate comprehensive that's what
you just call that resolution look like. Will it involve the government. Will it involve the PRC who seemed to say they want
somehow the private players involved to work this out.
I mean we would guess that right now in the decision making is not entirely in the chairman's hand anyway so the payment of
this coupon I would assume does involve the government including the PPO see in order to maintain stability of the whole
financial system. I think that much is sort of clear to the market.
I think the comprehensive plan is anybody's guess at the moment. But
judging from some other situations this year it's entirely possible that onshore and offshore negotiations may be handled
differently. Are there opportunities created with the ask this idea of a
localized ring fencing or do you think there is an overestimation of how credit markets are going to recover from
this. You know if anything I think there's been an over reaction
across the market such that dislocations are very much there for people to pick and choose through and see who the survivors are.
That being said of course tail risk has risen. Default rates now we would expect to rise as well. But I think
that you know there's been dislocations that are quite interesting both across WB as well as a select single being
games. But you know certainly overall tail risk has risen in the property sector.
When it comes to what we saw a couple of weeks ago which sort of really revived the fear of of the opacity of some of these cross
defaults and obligations that are not on the books right. Is that fear unfounded. Do you think that was an overreaction.
You know look I think that there is also a part besides the fundamental analysis. There's also
a technical impact on the market as there have been some portfolio underlines and unwind of structured credit products
that were you know with leverage included that had contained you know property bonds. That said you know as far as the pricing in
of fundamental risk you know it is the case that while the PPACA last week made some statements towards trying to stabilize the
market and mentioned the offshore bond market in you know as it relates to property sector I think that the intention of the
government still isn't to to kill the sector but to maintain deleveraging
trend in this sector to to to contain risk. You know I think that we do have to recognize one thing which is that property
developers do have a harder time in the versatility of the funding. So they are less able to shift cash from projects know
excess cash from the pre-sales. It is you know they have less versatility in that.
And it's also the fact that our dollar bond market right now because of the fear we have sort of spiraled DAX ourselves in
the US dollar bond market such that it's closed right now for new refinancing. So I think the real winners that will emerge
are those that made contingency plan ahead and are able to either sell some assets or you know I think it's really about
the the the ability to ride through the next six to eight months potentially
to pay out of their cash balance pay down their debt. So I think that's the separation of the winners and losers.
The BBC I think has shown that they will be pumping. They are pumping liquidity into markets right now rather than making any
triple R cuts for example. So I think they are adjusting their policies.