CBA back to $45-50 again soon?, page-254

No, but I imagine it will be at $80 by the time the Chinese property bubble plays out properly. If people really think the contagion effects of Evergrande are limited, they learnt nothing from the 2008 GFC. Of course analysts are talking effects down. They are talking book. Talking of books, little discussion has emerged of Evergrande's (and other property developers) off balance sheet debts too.

Much of China's property development market is founded under similar, if less excessive, leverage (and is 25% of GDP). Debt yields are already blowing up for other decently funded property companies by 200 basis points in months. Unless PRC makes a massive public admission of policy error, things are going to get very tight in the property sector paricularly.

Anybody following Chinese policy will also see this is a necessary pain to rein in a debt to GDP ratio that has ballooned by almost 50% in 5 years in China, much of it in the property sector. The issue is much of this leverage is in a property market that has vast swathes (20-30%) of unoccupied properties bought purely on speculation of a rising market.

There is going to have massive implication for Australia, much of whose balance of payments surpluses are funded by Chinese property growth. Australian banks and CBA have little direct exposure. European Banks do. International property and financial markets are not quite as unlinked as the pundits would have you believe. Much of Australian banking non-deposit funding is done on international debt markets that WILL be effected by the long warned Chinese housing issue - this is the PRC reining it in via a somewaht controlled demolition, rather than all out domino crash thankfully.

China has a huge wealth gap issue. It is moving towards a more egalitarian, service and consumption led model. This is so only beginning to unfold - the GFC played out over many years - and Australia's economic plight, and that of its banks, very tied up in China.