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Evergrande are in BIG trouble: China's second-largest developer is struggling for funding, facing court-freeze orders for debt repayments, alongside accusations that client deposits are being misappropriated...

• Early this week a court ordered a $20m bank deposit freeze
• Sales were suspended in Shaoyang as Evergrande had not deposited client funds into ESCROW as required
• Talk of a liquidity crisis is accelerating

Evergrande's problems have been building for some time...

We covered this in depth earlier in the year 👇👇👇

What’s up with China’s property market?

Evergrande, the real estate darling of China. At first glance, it appears like a straight-A student. However, it would take a prudent investor just five minutes of legwork to reveal that this company is, in fact, a troubled child.

MacrodesiacDavid Belle

And China's regulatory crackdown means developers have struggled to raise cash through traditional methods, instead relying heavily on client deposits 👇👇

The CCP are adamant that the three red lines must be met as they undertake an aggressive deleveraging of the bloated property sector.

Some believe that Evergrande is 'too big to fail' and point to photos of the CEO at the CCP's 100 year anniversary as evidence that he's still in favour.

Evergrande Founder’s Photo-Op Gives Bonds a Rare Boost

A photo of China Evergrande Group founder Hui Ka Yan attending Communist Party celebrations hosted by the country’s ruling elite lifted the embattled developer’s bonds, a day after the company was downgraded for the second time.

BloombergBloomberg News

We remain unconvinced.

China is cutting down on excesses and speculation across every sector.

What kind of message would it send if they saved Evergrande, the world's most indebted developer?

The chart is looking UGLY (Blue line = week open)

It's not gone well in the past year... 👇👇👇

Evergrande have pulled it out of the bag and turned things around before, but the situation now is looking desperate.

Promises of special dividends aren't going to cut it.

And if you can't access finance, how can you solve a liquidity problem?

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If you were stumped by the oil move yesterday, you're not alone. There's an absolute tonne of takes.

Is it OPEC+, is it the delta variant? And everyone's looking through a different lens.

Clear as mud.

I liked this from RBC:

"If today’s sample set of client conversations is any indication, it felt like macro hands stormed for the exit while energy specialists and fundamentalists were less fearful of wide ranging, severe lockdowns drastically re-rating oil demand lower" RBC /PiQ

Goldman Sachs made the point that the production path matters more than the baselines, and I tend to agree.

"If we progressively continue with the [400,000 b/d monthly increases], you will see some of these countries will not be able to achieve their numbers," - Prince Abdulaziz

Some speculative froth was definitely blown out of oil yesterday, but the supply picture and OPEC+ unity is clear...

Recommended Reading:

OPEC+ deal too little, too much, then just right for OPEC’s expected oil market

OPEC expects oil market to continue tightening but face seasonal demand speedbump in the first half of next year

Commodity ContextRory Johnston

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Everyone snatches at their profits sometimes. I was chatting with a trader in the Macrodesiac discord who'd bought the S&P low yesterday.

Just BTFD people, it's so easy.

That's why everyone's rich, right?

This trade was a beautiful rally from the lows...

Zero drawdown, nailed the entry, feelin' good.

But then it stopped going higher, and the whispers started...

"Take the money, it was a strong trade. Treat yourself, buy something nice"

That voice is something most traders come up against in their careers and one of the best ways to deal with it is to track the MFE after exiting every trade.  

MFE stands for Maximum Favourable Excursion i.e. the furthest a trade moves in favour of the trader.

It's normally used to show how much of a move a trader captures while in the trade, but it's a powerful tool to use for measuring missed opportunity too.

Tracking the post-trade MFE will soon show if a trader is exiting too early.

If they are, those sums soon add up and become a strong incentive not to be shaken out so easily by grabbing profits too soon.

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