𝐀 𝐥𝐨𝐭 𝐨𝐟 𝐧𝐨𝐧𝐬𝐞𝐧𝐬𝐞 𝐢𝐬 𝐛𝐞𝐢𝐧𝐠 𝐰𝐫𝐢𝐭𝐭𝐞𝐧 𝐚𝐠𝐚𝐢𝐧. 𝐀 𝐜𝐥𝐚𝐫𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧:
In addition to the price weaknesses and sell-offs I announced for September, there is now another imponderable: the Chinese real estate giant $03333.HK (China Evergrande Group) is tottering, which brings back bad memories of the Lehman Brothers bankruptcy for many. Even the major business newspapers are writing articles that scare market participants. That is why this week started weak. It began in Asia, reached Europe and now America - sellers everywhere. But their fear is relatively unfounded.
𝐈𝐬 𝐭𝐡𝐢𝐬 𝐋𝐞𝐡𝐦𝐚𝐧 𝐢𝐧 𝐭𝐡𝐞 𝐅𝐚𝐫 𝐄𝐚𝐬𝐭?
Many are worried about the future of the group, some already fear possible effects on the banking system and the Chinese real estate market. It is fairly certain that Evergrande will not survive in its current form. But warnings of a new Lehman crisis belong to the realm of fairy tales. There is hardly any risk of contagion for the global financial system. And this point is forgotten by many (not so) diligent writers in the business papers:
𝐄𝐯𝐞𝐫𝐠𝐫𝐚𝐧𝐝𝐞 𝐡𝐚𝐬 𝐛𝐨𝐫𝐫𝐨𝐰𝐞𝐝 𝐦𝐚𝐢𝐧𝐥𝐲 𝐟𝐫𝐨𝐦 𝐝𝐨𝐦𝐞𝐬𝐭𝐢𝐜 𝐬𝐭𝐚𝐭𝐞 𝐛𝐚𝐧𝐤𝐬, 𝐰𝐡𝐢𝐜𝐡 𝐚𝐫𝐞 𝐧𝐨𝐰 𝐡𝐨𝐥𝐝𝐢𝐧𝐠 𝐛𝐚𝐜𝐤 𝐨𝐧 𝐧𝐞𝐰 𝐥𝐨𝐚𝐧𝐬 𝐛𝐞𝐜𝐚𝐮𝐬𝐞 𝐁𝐞𝐢𝐣𝐢𝐧𝐠 𝐰𝐚𝐧𝐭𝐬 𝐭𝐨 𝐜𝐥𝐞𝐚𝐧 𝐮𝐩 𝐭𝐡𝐞 𝐡𝐨𝐭 𝐩𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐬𝐞𝐜𝐭𝐨𝐫. 𝐇𝐨𝐰𝐞𝐯𝐞𝐫, 𝐭𝐡𝐞 𝐠𝐨𝐯𝐞𝐫𝐧𝐦𝐞𝐧𝐭 𝐚𝐥𝐬𝐨 𝐤𝐧𝐨𝐰𝐬 𝐭𝐡𝐚𝐭 𝐢𝐭 𝐜𝐚𝐧𝐧𝐨𝐭 𝐬𝐢𝐦𝐩𝐥𝐲 𝐛𝐥𝐞𝐞𝐝 𝐚 𝐠𝐢𝐚𝐧𝐭 𝐥𝐢𝐤𝐞 𝐄𝐯𝐞𝐫𝐠𝐫𝐚𝐧𝐝𝐞 𝐝𝐫𝐲. 𝐓𝐡𝐞 𝐦𝐨𝐬𝐭 𝐥𝐢𝐤𝐞𝐥𝐲 𝐬𝐜𝐞𝐧𝐚𝐫𝐢𝐨: 𝐭𝐡𝐞 𝐩𝐨𝐥𝐢𝐭𝐢𝐜𝐚𝐥 𝐥𝐞𝐚𝐝𝐞𝐫𝐬𝐡𝐢𝐩 𝐰𝐢𝐥𝐥 𝐬𝐭𝐞𝐩 𝐢𝐧 𝐢𝐧 𝐬𝐨𝐦𝐞 𝐟𝐨𝐫𝐦. 𝐓𝐡𝐞𝐧 𝐚 𝐥𝐞𝐧𝐠𝐭𝐡𝐲 𝐫𝐞𝐬𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐢𝐧𝐠 𝐰𝐢𝐥𝐥 𝐟𝐨𝐥𝐥𝐨𝐰.
Clearly, it does not look good for Evergrande investors and bond buyers. Everyone should rather keep their powder dry, take a deep breath and stop acting so fearful. Fear appeals to the ancient primitive reflexes in our brains and makes us act rashly - and we would be best advised not to.
At the risk of repeating myself, such price reversals are perfect opportunities to start copying or increase the copy amount - with *copy open trades* ticked.
Have a good week!
BR