2024-01-30 12:04:00
It should be noted that China’s real estate sector has been an important engine of growth in the last two decades.
Washington López, CEO of Washington Capital, told Gestión that the first impact has been seen in the fall in the stock market.
“Distrust of the Chinese real estate sector is clearly frightening. There are more than US$300,000 in liabilities that Evergrande has, so this impact is directly proportional to copper, since it is an element highly correlated to the construction sector. And if China is the main buyer of copper, we have to see where this copper is going,” he said.
READ ALSO: Real estate firm China Evergrande ordered to be liquidated due to lack of debt agreement
In the short term, he added, there will be a correction in the price of copper because demand will be reduced in the world. “And if we focus on Peru, we have five important copper-producing mines, the question would be, how many and how much do they sell to China? between Cerro Verde and Antamina, 50% of their sales go to China.”
However, in the long term he described that it might be an opportunity for Peru. “While these companies may lose a little on the quantity purchased, in the end they will have a long-term benefit on the price.”
“Copper will have a positive performance towards the end of the year. China has approved a fiscal stimulus that is injecting liquidity, it is a superior package to the one it issued in the pandemic crisis; Then, that liquidity will help holders increase purchases of the metal. “I do see a recovery and I believe that this news from Evergrande generates buying opportunities at important technical prices,” he explained.
READ ALSO: Minem: Mining exports continue to rise due to high demand for copper, gold, zinc and lead
Marco Contreras, from Kallpa SAB, said that this decision to liquidate Evergrande had already been internalized in the market, “that is why there has not been any type of negative reaction. The Peruvian market has risen today, the market is attentive to other variables.”
“Obviously the fact that they liquidate it is not good news, it will have an impact, but it is something that the market already expected,” he highlighted.
Evergrande and the Chinese real estate market
Mainland Evergrande CEO Shawn Siu called the decision “regrettable,” while promising that the company’s operations would continue.
The Hong Kong court ordered China Evergrande to liquidate its subsidiary in the territory following a failed attempt to restructure US$300 billion owed to banks and bondholders. Much of that amount Evergrande owes is deposits paid by Chinese citizens for newly built apartments.
Over the past two decades, Chinese consumers have invested their savings in real estate, helping real estate companies’ profits soar. Speculation drove real estate prices to unaffordable levels.
China Evergrande Group is among dozens of Chinese developers that have gone bankrupt since 2020 under pressure from authorities to rein in their debt, which the country’s ruling Communist Party sees as a threat to China’s lackluster economic growth.
READ ALSO: China reactivates its economy by reducing reserve requirements for banks
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