India’s Covid death toll has been massively underreported. Top lenders are losing faith in China Evergrande. Musk loves Bitcoin and he isn’t afraid to show it. Asia here’s what you need to know.
India’s death toll from Covid-19 has been grossly underreported, with the actual number of deaths ranging from 1.3 million to a staggering 5 million, according to figures derived from research models and local authority data. That’s up to 10 times the country’s official count of around 420,000 deaths. Meanwhile, the Tokyo Olympics is facing the first major test of its Covid protocols, after three people linked to the South African men’s soccer team tested positive for the coronavirus, putting its match against Japan into jeopardy; the country has seen an estimated 1 million hotel room cancellations on the news that spectators will be not be allowed into the Games; and shares of one Japanese homebuilder dived after the company’s president threatened to sack staff who had been vaccinated. And Covid has had a dramatic effect on U.S. life expectancy.
Asian stocks look set to climb after solid company earnings boosted Wall Street, easing concerns about peak economic growth and coronavirus flareups. The dollar and Treasuries declined. Futures rose in Australia and Hong Kong, while Japan is shut for a holiday. U.S. futures were steady after the S&P 500’s biggest back-to-back advance in two months, led by cyclical stocks like energy and financials. Verizon and Coca-Cola rose after better-than-estimated results, while United Airlines predicted profits ahead despite concerns about Covid-19’s threat to travel. Ten-year Treasury yields headed back toward 1.3% as the recent rally in bonds fizzled.
Some of Asia’s top lenders are losing faith in China Evergrande. HSBC, Bank of China’s Hong Kong unit, Hang Seng Bank and Bank of East Asia stopped providing mortgages to buyers of Evergrande’s unfinished residential properties in Hong Kong, the latest sign of dwindling confidence in the developer’s financial strength. The unusual move by four of the city’s biggest mortgage lenders to act in unison underscores how dramatically perceptions of Evergrande have deteriorated in recent weeks. Shares of the world’s most indebted developer have tumbled 28% just this month and several of its dollar bonds have plunged to record lows.
Bitcoin rebounded after Elon Musk reaffirmed his love affair for the cryptocurrency. The billionaire head of Tesla said he personally holds the token, as do Tesla and his space exploration company SpaceX. Speaking at “The B Word” conference hosted by the Crypto Council for Innovation, Musk discussed the outlook for Bitcoin with fellow backers Cathie Wood and Jack Dorsey. Bitcoin extended gains past $32,000, continuing a rebound after erasing most of its gains for the year. And it’s not just Musk. A Goldman Sachs survey showed the ultra-rich are increasingly looking to make bets on crypto.
Federal Reserve Chair Jerome Powell may enjoy a second term as head of the Fed, with broad support for renomination among top White House advisers. A decision is expected later this year, but officials are keeping an open mind about how the administration can
put its stamp on the central bank through personnel choices, including the chair. Experts and outside analysts say that if Biden is looking to change leadership at the Fed, current Governor Lael Brainard is a likely candidate. The president passed her over for Treasury secretary, with progressives criticizing her record on climate change and financial regulation, but they have indicated openness to her being Fed chair.What We’ve Been Reading
This is what’s caught our eye over the past 24 hours:
And finally, here’s what Tracy’s interested in today
We talked on Monday about China Evergrande's odd announcement from last week that the beleaguered real estate developer was considering paying a special dividend. Since then, the company's troubles have worsened, with both shares and bonds plunging as worries over Evergrande's ability to pay its debt escalate. Just like Huarong, investors are talking about the possibility of a restructuring as China attempts to wean debt investors off a long history of implicit guarantees.
With that context, it's interesting to note that the spread between Evergrande's onshore and offshore debt keeps widening. The below chart, via Ben Emons at Medley Global Advisors, shows that yields on offshore bonds are almost double those on local debt now. Liquidity differences can make comparisons between the two markets tricky, but one way of viewing that spread is that investors see offshore bonds as far more vulnerable in a restructuring. Another way of viewing it, is that Chinese and foreign investors are making rather different bets on the likelihood of China letting Evergrande go.
You can follow Tracy Alloway on Twitter at @tracyalloway.
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July 22, 2021 at 06:36AM
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Five Things You Need to Know to Start Your Day - Bloomberg
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