Morning from Europe.

The Evergrande group is being ordered to liquidate by a judge in Hong Kong after struggling to deliver a concrete restructuring plan. The trading has been halted in the Evergrande stock, but it can hardly come as a surprise given the malaise seen over the past years and the continuous postponement of restructuring plans.

The international spill-overs will be very limited, if visible at all, but we are yet to see if Chinese authorities will have to take further ring fencing initiatives to avoid contagion in the Chinese financial system. We are not overly worried about this development and we’d like to remind you that Evergrande was a “target” of the three red lines policy introduced in August 2020 as they breached covenants day 1. Evergrande’s downfall has largely been orchestrated by the Politburo.

Chart 1: Bye bye, Evergrande