Mortgage Boycotts are Sparked by the Chinese Real Estate Slump

People would have laughed at you if you had told them a decade ago that the mortgage boycotts were sparked by the Chinese real estate slump. The internet has made it easier than ever to know just about anything you want. So with all this content and information available, how did you know which ones to learn from and which ones actually work?

“Luckily, you are in Real Estate Heaven and for today’s blog we will be talking about the mortgage boycotts. Did you know that by the Chinese real estate slump they were sparked. Remember, that while the first step is completing any of this amazing information, the second and possibly more important step is taking action even if it’s imperfect action.

 

In a desperate and protesting move, hundreds of thousands of Chinese homeowners have threatened to stop making their mortgage payments on unfinished apartments. According to one of our mentors last Wednesday, at least 326 homeowner groups in China are threatening to stop paying their mortgages as construction work stagnates amid a general price collapse.

The newspaper reported that these boycotts may have an impact on $222 billion in bank-held loans, or 4% of the nation’s outstanding mortgage balances, according to analysis from one of our mentors.

Hunan Province residents wrote to local officials last month saying that they could no longer afford their monthly mortgage payments because life was so difficult. We must follow the course of a mortgage strike and take risks out of desperation.

According to Michael Pettis, a finance professor at Peking University, the Chinese economy is currently in a precarious position as a result of a sizable housing bubble that inflated recently and burst, which he explained to one of our mentors.

And according to Pettis, the majority of government solutions that have been put forth, such as providing funding to developers to help them finish their projects, are insufficient to deal with the fundamental problems.

In response to our mentor, Pettis said, “There has been all this fictitious wealth that has been created by surging real estate prices that is just not justified.” “Those solutions serve only as band-aids to try to temporarily improve the situation. I don’t think they’ll be successful in the end.

 

Credit was simple to obtain in recent years when real estate prices in China were still rising, and there was a general expectation that prices would increase as apartment buildings were built.

Nine out of ten buyers of new homes were prompted by these circumstances to buy their apartments in advance, locking in loans early and starting their mortgage payment schedule before their buildings had even been finished.

However, since prices fell, Chinese homebuilders have reported having trouble paying their contractors, which has led to the postponement or stalling of numerous construction projects, according to one of our mentors.

According to the report, hundreds of these landscaping companies, construction firms, and other companies that provide services to the real estate industry wrote a joint statement last month claiming they were “facing a crisis of survival” and had not received payment in months.

Homeowners in China who default on their loans run additional risks that they do not in the United States. Due to the nation’s “social credit” system, those who default on their mortgage payment may also face restrictions on future loan eligibility as well as travel and even the ability to enroll their children in specific schools.

Even so, some of these homeowners claim they feel trapped. They wrote, “The credit system is a paper tiger for us, a shackle that can be thrown into the trash at any time, when we feel desperate.”

Apartment buyers in a single project in a city in central China initially staged it as a show of displeasure. Tens of thousands of people are currently delaying mortgage payments on houses that developers, like China Evergrande Group, are still building across the nation.

 

The wildcat boycott on loans up to 2 trillion yuan ($296 billion) could worsen China’s real estate downturn by refocusing attention away from the nation’s troubled real estate firms and toward its enormous banks. Mortgages have been the lenders’ most reliable source of income as Covid lockdowns stifle growth.

The decision-makers are alert. According to those familiar with the situation, financial regulators have urged banks to increase lending to builders in order to help complete the projects. Officials may even consider granting homeowners a payment grace period. Even as a gauge of lenders’ stocks fell, bank after bank gave investors assurances that risks are manageable and their exposure to the postponed projects is minimal. The shares and bonds of China’s real estate companies have also fallen, including those of some major players who were previously thought to be shielded from the sector’s problems. One of our mentors, a macro strategist at DBS Bank, says that if this trend is allowed to continue and snowball, there is a chance that it could worsen Chinese banks’ credit profiles and halt the recent uptick in real estate sales.

Despite the recent wave of defaults by Evergrande and other developers, the protests are escalating a crisis that Beijing seems to have under control. Sales last month increased over those in May, indicating that the real estate market was starting to stabilize. The market had bottomed out, according to the chairman of one of the largest developers.

Even though the boycotts currently only have an impact on a small portion of the combined mortgage portfolios of the lenders, the protests’ rapid expansion caught many by surprise. They began in late June with a social media campaign supported by 900 buyers in an Evergrande project that had stalled in Jingdezhen, a city close to Yellow Mountain and known for its porcelain. They publicly pleaded with the company and their local government to pick up the construction within three months or they would stop paying. According to data from a crowdsourced document called “WeNeedHome,” the movement has since spread to at least 301 projects in roughly 91 cities.

 

According to a note from analysts at Jefferies Financial Group Inc. led by one of our mentors, that’s an increase from just 28 projects less than a week earlier. According to China Real Estate Information Corp., unfinished projects in 24 major cities total 24.7 million square meters (266 million square feet), which is equivalent to 10% of the homes that were sold in the previous year. Banks have already reported missed payments, despite the initial social media post’s threat to withhold money in a few months. The Nomura economists, led by one of our mentors, wrote in a note on Wednesday that “the stakes here are high.”

After China started censoring crowdsourced online documents tallying the number of boycotts in mid-July, keeping track of the protest’s scope has grown more challenging. For international investors and researchers, these shared files have been a valuable source of information.

In 2019, Gao Yang acquired a 900,000-yuan condo from Sinic Holdings Group Co. in the heart of Nanchang. Even though he has been paying his mortgage for two years, the condo unit is still unfinished. Gao has frequently traveled three hours by train from his current residence in Hangzhou to the developer and the local government to urge them to act. He expects little change and will withhold his 4,000 yuan payment for the following month in order to join the boycott.

The 32-year-old designer says, “That makes up about half of my income—a it’s huge pressure,” adding that his pay has been cut by a third due to the recession. “As long as work can start again someday, I can tighten my purse strings.” Requests for comment from Sinic and Evergrande were not immediately returned.

The boycotts highlight the particular dangers of purchasing a home in China. While buyers in many nations must make down payments to reserve a home before it is built, they typically don’t start making mortgage payments until they take ownership. When projects are delayed, loan payments in China can continue for years after the initial deposit. Developers were able to start new projects before older ones were completed thanks to that stash of presale money, which fed the housing boom over the previous ten years. In essence, the builders were taking out loans from the homebuyers, except that they owed them houses rather than money.

 

The government crackdown on borrowing by overleveraged companies last year caused at least 18 defaults on bonds worth more than $26 billion, including Evergrande and other well-known companies like Sunac China Holdings Ltd. and Kaisa Group Holdings Ltd. Even though Beijing has repeatedly pushed for the construction to be finished, the cash crunch has made it more difficult for developers to finish projects.

According to Lu at Nomura, from 2013 to 2020, only about 60% of the homes that Chinese developers pre sold were actually delivered. The company facing the most boycotts, per the online count, is China Evergrande, which has been the target of demonstrations over abandoned projects since last year. The other builders—more than a dozen—are the targets.

About 78% of household wealth in China is made up of real estate, which is double the rate in the US. Families typically save for years and take out loans from friends and family to buy a home. Many market observers predicted that the financial contagion would be constrained by the fact that Chinese homebuyers frequently pay in cash as the Evergrande disaster played out last year. However, some people did use mortgages, and the boycott highlights how heavily households have been burdened by the crisis.

The People’s Bank of China estimates that as of the end of 2021, China had 38.3 trillion yuan worth of outstanding mortgages. According to GF Securities Co., the collective refusals could have an effect on up to 2 trillion yuan worth of mortgages. The amount that could be withheld will be less than the total outstanding balance of the loans.

 

Other impact estimates are less ominous. According to Chen of Jefferies, if every buyer defaulted, there would be an increase in non performing loans of 388 billion yuan. Banks claim that the impact is even lower. A list of banks that have disclosed their exposure indicates that lenders have identified loans totaling about 2.11 billion yuan as being at risk from the protests.

Given that Chinese families rarely default on mortgages and that banks are legally permitted to demand full repayment, according to Chang at DBS, the protest is all the more remarkable. Even so, consumers might be holding out hope that a solution will be forced upon them by a concerted effort, especially given Beijing’s efforts to contain social unrest in advance of the Communist Party Congress in October. Diana Choyleva, chief economist at Enodo Economics, stated during an interview with Bloomberg Television that “this is a political protest.” There won’t be a banking crisis because they aren’t present. However, it is a potential confidence crisis that the Chinese Communist Party greatly fears.

According to Chen at Jefferies, the government is in a pickle. Although easing lending regulations to benefit homebuyers may lead to more defaults, social stability is still the government’s top concern. “Our default position is that the government should intervene and cut the Gordian knot,”

 

These are the 10 stocks that could suffer from a Chinese real estate crash

 

China’s real estate crisis is sparked by The Evergrande Group

China has the second-largest economy in the world, and the country’s real estate industry, which accounts for about one-third of its GDP, has been a key factor in that economic growth. Founded in 1996, the China Evergrande Group (OTC:EGRNF) has developed into one of the biggest real estate companies in both China and the entire world. In the ten years since its founding, the China Evergrande Group (OTC:EGNRF) has increased its assets to approximately $150 billion, piled on debt, and, as of 2022, developed over 1,300 projects spread across roughly 280 Chinese cities. According to Reuters, this debt increased to a total of about $300 billion in April 2022, making The China Evergrande Group (OTC:EGRNF) the most indebted real estate developer in the world.

 

Three Red Lines

The Chinese government passed regulations in August 2020 to restrict the amount of debt that Chinese real estate developers may take on. Liability-to-asset, debt-to-equity, and debt-to-assets ratios were three thresholds that Chinese real estate developers had to meet in order to be approved for additional debt under the “three red lines” policy. The “three red lines” policy was broken by the majority of Chinese real estate developers in October 2021.

 

Mortgage Protests

Being the second-largest economy in the world, China’s real estate bubble is about to burst, which could have extremely negative effects on international markets. Chinese banks and the government are concerned about mortgage boycotts. The number of homebuyers who have stopped making mortgage payments is unknown at this time, but according to S&P Global Ratings, the value of boycotted mortgages may be $145 billion. According to Bloomberg, the worst-case scenario could result in a boycott of mortgages totaling up to $350 billion for the $56 trillion Chinese banking sector.

 

Potentially Contagious

The Chinese economy and international markets may suffer if China’s real estate market collapses. China’s transformation into an economic powerhouse has been fueled by the real estate sector, and should it collapse, China may experience a quick recession. A report by OEC World claims that the mortgage crisis is resulting in a decrease in Chinese imports of new building supplies for homes. China’s imports of construction goods fell 15% from the previous year in June 2022. Forklift imports decreased by 58.17% compared to the same month last year, heating machinery imports fell by 30.46%, and there were 13.5% fewer air pumps imported into China in June 2022.

According to a Financial Times analysis, the collapse of the Chinese real estate market would be a serious blow to multinational commodity companies. The economy could experience a significant downturn if the Chinese real estate market crashes, which would have an effect on many large-cap companies with sizable revenue exposure to China. Micron Technology, Inc. (NASDAQ:MU), Apple Inc. (NASDAQ:AAPL), QUALCOMM, Inc. (NASDAQ:QCOM), and Advanced Micro Devices, Inc. are a few large-cap firms with significant revenue exposure to China (NASDAQ:AMD).

 

Our Technique

We looked at businesses that are exposed to the Chinese real estate and construction markets in order to identify 10 stocks that are susceptible to a real estate crash in China. We chose mining firms, construction businesses, and Chinese pure-play real estate and real estate services firms. According to the percentage of those companies owned by hedge funds, we ranked our picks in ascending order. The database of approximately 900 elite hedge funds maintained by Insider Monkey served as the source for the hedge fund sentiment.

 

10 Stocks at Risk as China Real Estate Market Collapses

 

10. China’s Ping An Insurance Company, Ltd. (OTC:PNGAY)

Holders of Hedge Funds: N/A

The People’s Republic of China’s Ping An Insurance Company of China, Ltd. (OTC:PNGAY) offers financial goods and services to the insurance, banking, asset management, fintech, and health-tech industries. Four business divisions make up the company’s operations: insurance, banking, asset management, and internet financing.

Ping An Insurance Company of China, Ltd. (OTC:PNGAY), according to The Financial Times, suffered significant losses in 2021. These losses were attributed to weaker demand in the company’s life insurance segment as well as its exposure to China Fortune Land Development, a significant Chinese real estate developer, which resulted in losses of Rmb 24.3 billion for Ping An Insurance Company of China, Ltd. (OTC:PNGAY).

One of the largest insurance companies in the world by market cap is Ping An Insurance Company of China, Ltd. (OTC:PNGAY), but it could be severely impacted by a housing crisis in China. Ping An Insurance Company of China, Ltd. (OTC:PNGAY) shares had fallen more than 33.72% over the previous 12 months as of August 11.

If China experiences a housing crisis and subsequent recession, some large-cap U.S. businesses like Micron Technology, Inc. (NASDAQ:MU), Apple Inc. (NASDAQ:AAPL), QUALCOMM, Incorporated (NASDAQ:QCOM), and Advanced Micro Devices, Inc. (NASDAQ:AMD) are also likely to suffer.

 

9. Leju Holdings Limited  (NYSE:LEJU)

Holders of Hedge Funds: 2

As a potential housing crisis rattles the Chinese economy, Leju Holdings Limited (NYSE:LEJU) stock is declining. The stock had lost 85% of its value as of August 11 in the previous year. In the People’s Republic of China, Leju Holdings Limited (NYSE:LEJU) offers online-to-offline real estate services. Through its online platform, which consists of websites covering 401 cities and various mobile applications, the company provides real estate e-commerce, online advertising, and online listing services. The business also provides services to individual property sellers in addition to fee-based online real estate listing services for real estate agents. The business was established in 2013 and has its headquarters there.

Two hedge funds had positions in Leju Holdings Limited (NYSE:LEJU) at the end of Q1 2022, totaling less than $1 million, down from $1.03 million from three long positions a quarter earlier. With approximately 1.02 million shares of Leju Holdings Limited (NYSE:LEJU) as of March 31, Renaissance Technologies is the company’s largest shareholder.

 

8. Xinyuan Real Estate Co. (NYSE:XIN)

Holders of Hedge Funds: 3

The People’s Republic of China, the United States, and other countries are served by the residential real estate development and construction activities of Xinyuan Real Estate Co. Ltd. (NYSE:XIN). The business creates residential projects, including multi-story apartment buildings, sub-high-rise apartment buildings, and high-rise apartment buildings, as well as ancillary services and amenities, including shops, spas, gyms, daycare centers, and schools, as well as office, mixed-use, and commercial buildings.

Xinyuan Real Estate Co., Ltd. (NYSE:XIN) might lose a lot of value if China’s mortgage crisis doesn’t get better. Xinyuan Real Estate Co. Ltd. (NYSE:XIN) shares have plummeted by 72.77% as of August 11 over the previous 12 months.

Three hedge funds owned stock in Xinyuan Real Estate Co., Ltd. at the end of the first quarter of 2022. (NYSE:XIN). About $140,000 was the approximate total value of those stakes, up from about $120,000 a quarter earlier. Renaissance Technologies, which held a stake in Xinyuan Real Estate Co., Ltd. (NYSE:XIN) worth about $100,000 as of March 31, was the company’s largest shareholder.

 

7. Fanhua Inc.  (NASDAQ:FANH)

Holders of Hedge Funds: 4

A decline in China’s housing market directly threatens Fanhua Inc. (NASDAQ:FANH). Fanhua Inc. (NASDAQ:FANH) had lost 63.18% of its value over the previous 12 months as of August 11.

In China, insurance products are distributed by Fanhua Inc. (NASDAQ:FANH). The business is divided into the Insurance Agency and Claims Adjusting segments. The Insurance Agency segment offers personal accident, travel, homeowner, and indemnity medical insurance products as its main property and casualty insurance offerings. Pre-underwriting surveys, claims adjusting, residual value disposal, loading and unloading supervision, and consulting services are all provided by the claims adjusting segment.

4 hedge funds had bullish positions in Fanhua Inc. (NASDAQ:FANH) at the end of the first quarter of 2022, with total stakes worth $1.29 million. This was less than a quarter earlier when 7 hedge funds had stakes worth $2.83 million. With approximately $720,000 worth of shares of Fanhua Inc. (NASDAQ:FANH) as of March 31, Arrowstreet Capital is the company’s largest shareholder.

 

6. BHP Group  (NYSE:BHP)

Holders of Hedge Funds: 19

One of the biggest producers of iron ore in the world and a significant supplier to China is BHP Group Limited (NYSE:BHP). If China’s housing market collapses, BHP Group (NYSE:BHP) could see significant drops in sales. According to Bloomberg, China produces about 1 billion tons of steel annually. Goldman Sachs analysts predict that the housing downturn will cause steel demand to decline by 5% in 2022. BHP Group (NYSE:BHP) had lost 20.14% over the previous 12 months as of August 11.

BHP Group is undervalued by Wall Street (NYSE:BHP). On July 20, Credit Suisse analyst Danielle Chigumira maintained a ‘Neutral’ rating and lowered her price target on BHP Group’s (NYSE:BHP) shares to 2,200 GBP from 2,500 GBP. In July, Lyndon Fagan, an analyst with JPMorgan, lowered his price target for BHP Group (NYSE:BHP) from 2,510 GBP to 2,440 GBP while maintaining a ‘Neutral’ rating for the stock.

19 hedge funds had total holdings in BHP Group (NYSE:BHP) valued at $2.24 billion at the end of Q1 2022. 25 hedge funds owned $2.02 billion worth of stock in the company as of the end of 2021. BHP Group (NYSE:BHPlargest )’s shareholder as of June 30 was Fisher Asset Management, which held a $1.01 billion stake in the business. The investment equals 0.71% of Ken Fisher’s 13F portfolio’s value.

BHP Group (NYSE:BHP) is suffering in 2022 along with the larger Chinese economy, just like Micron Technology, Inc. (NASDAQ:MU), Apple Inc. (NASDAQ:AAPL), QUALCOMM, Incorporated (NASDAQ:QCOM), and Advanced Micro Devices, Inc. (NASDAQ:AMD).

 

5. Rio Tinto Group  (NYSE:RIO)

Holders of Hedge Funds: 26

Rio Tinto Group (NYSE:RIO) is a global company that explores, mines, and processes mineral resources. The company sells lithium, iron ore, salt, borates, diamonds, gold, copper, aluminum, copper, diamonds, and titanium dioxide. Slowing Chinese demand could hurt Rio Tinto Group (NYSE:RIO), and as of August 11, the stock had already begun to reflect that, falling 30.31% over the previous year.

The earnings results for the six-month period that ended on June 30 were released by Rio Tinto Group (NYSE:RIO) on July 27. With revenue down 10% year over year to $29.8 billion, the company reported EPS of $5.327. In the first half of 2022, the company’s consolidated sales revenue in China decreased to 52.1% from 59.9% in the same period the previous year.

On July 28, UBS analyst Myles Allsop reiterated his ‘Neutral’ rating for Rio Tinto Group (NYSE:RIO) and lowered his price target from 4,400 GBP to 4,300 GBP.

26 hedge funds held long positions in Rio Tinto Group (NYSE:RIO) at the end of Q1 2022, totaling $2.54 billion. This was more than the 22 positions and $1.83 billion in stakes from the previous quarter. Rio Tinto Group (NYSE:RIOlargest )’s shareholder as of June 30 was Fisher Asset Management, which owned approximately 14.8 million shares of the company.

 

4. Vale S.A. (NYSE:VALE)

27 investors in hedge funds

Iron ore and iron ore pellets are produced and sold by Vale S.A. (NYSE:VALE) for use as raw materials in steelmaking in Brazil and other countries. Base Metals and Ferrous Minerals are the company’s two operating segments. As a significant supplier of iron ore to China, Vale S.A. (NYSE:VALE) is exposed to the country’s construction industry. Vale S.A. (NYSE:VALE) is likely to experience significant declines if China experiences a housing crash. Vale S.A. (NYSE:VALE) had lost 32.38% over the previous year as of August 11.

 

On July 13, Exane BNP Par ibas analyst Sylvain Brunet reiterated his $16 price target on Vale S.A. (NYSE:VALE) and downgraded the stock from ‘Outperform’ to ‘Neutral’. On July 28, Vale announced fiscal Q2 EPS of $0.94, exceeding expectations by $0.14. The company’s revenue for the quarter fell short of expectations by more than $428 million, falling by 33.09% year over year to total $11.2 billion. Additionally, the company reduced its forecast for iron ore production for the entire year, stating that it now expects production to fall between 310 million and 320 million metric tons, down from its earlier forecast of between 320 million and 335 million metric tons.

27 hedge funds had bullish positions in Vale S.A. (NYSE:VALE) at the end of the first quarter of 2022, with their total stakes in the company valued at $2.37 billion. These numbers represent increases over the 25 funds with $1.71 billion in stakes a quarter earlier. Fisher Asset Management, the largest shareholder in Vale S.A. (NYSE:VALE) with a $325 million position, owned nearly 22.2 million shares of the company as of June 30.

 

3. KE Holdings Inc.  (NYSE:BEKE)

Holders of Hedge Funds: 34

Another company at risk from a Chinese mortgage crisis is KE Holdings, Inc. (NYSE:BEKE), which runs an integrated online and offline platform for housing transactions and services in the People’s Republic of China. Existing Home Transaction Services, New Home Transaction Services, and Emerging and Other Services make up KE Holdings’ three business segments. It enables a range of housing transactions, including the buying and selling of new and existing homes, home rentals, home remodeling and furnishing, and other services. BEKE stock had lost 23.63% year to date as of August 11.

34 hedge funds held positions in KE Holdings Inc (NYSE:BEKE) valued at $883 million at the end of Q1 2022, a significant decrease in value from the 34 funds that held positions valued at $2.3 billion a quarter earlier. Bridgewater Associates sold a $55.4 million position in KE Holdings Inc. (NYSE:BEKE) in the second quarter of 2022, reducing its holding by 6%. The largest shareholder in KE Holdings Inc. (NYSE:BEKE) as of June 30 is Ray Dalio’s hedge fund, which has 3.08 million shares of the company.

 

2. Caterpillar, Inc. (NYSE:CAT)

Holders of Hedge Funds: 54

Leading global manufacturer of mining and construction equipment is Caterpillar Inc. (NYSE:CAT). The company reported on August 2 that the mortgage crisis in China has significantly reduced demand for its excavators. Caterpillar Inc. (NYSE:CAT) reported that its sales in Asia decreased by 17% year over year in the second quarter of 2022. The company stated that 10% of its total revenue comes from China and that the nation’s mortgage crisis is hurting Caterpillar Inc. (NYSE:CAT) and its competitors.

Caterpillar Inc. (NYSE:CAT) released its financial results for the second quarter of its fiscal year 2022 on August 2. Earnings per share for Caterpillar came in at $3.18, exceeding expectations by $0.16. The company’s revenue came in at $14.25 billion, which was $136 million less than Wall Street expectations. The stock of Caterpillar Inc. (NYSE:CAT) has dropped 12% so far this year as of August 11.

On August 3, Morgan Stanley analyst Dillon Cumming noted that concerns about the peak cycle may arise as a result of revenue shortfalls in Caterpillar Inc.’s (NYSE:CAT) construction and resource segment and declining retail sales. On Caterpillar Inc. (NYSE:CAT) shares, the analyst reiterated a “Underweight” rating and a $142 price target.

54 hedge funds held positions worth $4.01 billion in Caterpillar Inc. (NYSE:CAT) at the end of the first quarter of 2022. 53 funds had total CAT stakes worth $4.99 billion at the end of 2021. Of the funds that have so far disclosed their Q2 holdings, Fisher Asset Management is the most bullish on Caterpillar Inc. (NYSE:CAT), holding a $1.34 billion position in the company.

 

1. Freeport-McMoRan Inc. (NYSE:FCX)

68 people own hedge funds.

China consumes about 50% of the copper produced worldwide, according to Freeport-McMoRan Inc. (NYSE:FCX), one of the world’s largest copper producers. According to Reuters, China imported 1.87 million tonnes of refined copper in the first half of 2022, up from 0.37 million tonnes in June. However, if the Chinese housing market collapses, so does the demand for copper, and as a result, Freeport-McMoran Inc. (NYSE:FCX) may experience a sharp decline in demand. FCX has lost 23.6 percent so far this year as of August 11.

Freeport-McMoran Inc. (NYSE:FCX) released its financial results for the second quarter of its fiscal year 2022 on July 21. It announced $0.58 in earnings per share, which was $0.07 below Wall Street expectations. The company reported $5.42 billion in revenue for the quarter, a decline of 5.78% year over year. Expectations were also notably missed, coming up over $724 million short. On July 22, analyst Abhi Agarwal with Deutsche Bank decreased his price target for Freeport-McMoRan Inc. (NYSE:FCX) from $37 to $35 and maintained a ‘Hold’ rating for the stock.

By the end of the first quarter of 2022, 68 hedge funds had positions in Freeport-McMoran Inc. (NYSE:FCX) valued at $4.1 billion, up from 66 positions at $3.77 billion. As of June 30, Fisher Asset Management held more than 52 million shares of Freeport-McMoran Inc. (NYSE:FCX) valued at $1.52 billion.

 

The real estate companies in China are simply too large to fail. They are the beneficiaries of the urban middle class of the nation’s wealth. About 30% of China’s GDP is made up of property. Because local governments were under pressure from the public and were concerned about the impact even a slight deflation of the real estate bubble could have, price cooling measures kept failing. Chinese real estate prices are currently declining, but this decline is being slowed down by local government pressure on developers to maintain a reasonable price point.

It’s possible that at some point the federal government will take drastic measures, such as de facto nationalizing a portion of the real estate sector. One reason is that whenever there is a problem, Chinese President Xi Jinping’s instinctive response is to increase government control. However, even that will likely have to wait until the following year. The 20th National Congress of the Chinese Communist Party, and Xi’s virtually certain third term, is currently the focus of the party-state system’s internal positioning.

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