Evergrande Liquidation / Amazon Adverts / UK Inflation Easing

The China Evergrande Group was finally put out of its misery yesterday after receiving a liquidation order from a Hong Kong court, kickstarting the daunting process of carving up the biggest casualty of China’s property crisis. In total the developer had amassed more than USD300bn in debt during the property boom, only to see the entire empire crumble along with the rest of the sector.  

The developer was valued at just USD275m when trading in its shares was halted yesterday, 99% lower than its peak. The company’s bond, which is closest to maturity, the 8.75% 2025, is now trading at around one cent in the dollar.  

The liquidation will be watched closely as it tests whether the Hong Kong court order will be recognised in mainland China. Although there is an agreement to recognise such orders in certain Chinese provinces, in practice, it has been challenging due to the complexity of China's legal system. Hong Kong’s courts have issued at least three wind-up orders for other Chinese developers since the property crisis began in 2020. However, none of them have been as complex as Evergrande, in terms of asset size, and the number of stakeholders.  

After the ruling, Shawn Siu, Evergrande’s CEO said in a statement: “The company has made all efforts possible and is sorry about the winding-up order”. In addition: “The company will ensure home deliveries and steadily promote normal operation of the group.” It will also communicate with the appointed liquidator, he added.  

We also read that Amazon Prime will deliver something that most of us do not want, adverts. In the US Prime Video has begun showing ads in a move some analysts expect will generate more than USD5bn in revenue annually for the company. You can opt out of course, for an extra $3 per month on top of your subscription.  

Amazon has been late to the party with regards to commercials, with rivals Netflix and Disney having already gone down that route. However, in its fight for businesses to use Amazon rather than other streaming outlets, the ace up Bezos’s sleeve is data. With more than 70% of US adults having an Amazon Prime membership, the company can use their buying history to place more targeted ads, in doing so promise brands a higher return on their marketing dollar.   

Lastly, in another sign that inflation here in the UK may be easing, shop price inflation fell sharply this month as retailers offered heavy discounts to attract buyers. Annual shop prices slowed to 2.9%, down from 4.3% in December, the seventh monthly drop in a row and the lowest since May 2022.  

At the time of writing, the market is still 50/50 on the first rate cut in May later this year.