China’s Evergrande Group filed for Chapter 15 bankruptcy protection in a U.S. court.
- The company referenced restructuring proceedings in Hong Kong, the Cayman Islands and the British Virgin Islands.
- Evergrande is the world’s most indebted property developer and defaulted in 2021.
- Chapter 15 bankruptcy protection allows a U.S. bankruptcy court to intervene in cross-border insolvency case involving foreign companies that are undergoing restructuring from creditors.
- Tianji Holdings, an affiliate of Evergrande, and its subsidiary, Scenery Journey, also filed for Chapter 15 protection in Manhattan bankruptcy court.
- Evergrande’s filing comes amid contagion fears that China’s property sector troubles could spill over to other parts of the economy.
- Country Garden, which used to be one of China’s largest developers, also struggled to make coupon payments on U.S. dollar-denominated bonds and issued a profit warning.
- China’s massive real estate sector has long been a vital engine of growth for the world’s second-largest economy.
- Evergrande posted a combined loss of $81 billion over the past two years.
- The bankruptcy filing was signed by Jimmy Fong, who listed himself as a “foreign representative” of China Evergrande Group.
VIX Breakout Setup
The VIX, or the fear index, has been on the rise in recent weeks, setting up a potential breakout.
VIX pricing pattern is showing higher-lows and higher-highs, which is what it does when systematic strategies and consensus hedge fund positioning are off-sides at the same time. This is a sign that volatility is likely to continue to rise in the near term.
The August options expiration (OPEX) is today, which could also add to volatility. OPEX is a time when large hedge funds and other market participants rebalance their portfolios, which can lead to increased volatility.
Overall, the setup for a VIX breakout is in place. Investors should be prepared for increased volatility in the coming weeks.
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Bankruptcy fillings have surged towards 2008 and 2020 highs according to Visual Capital. As of July 31, 2023 the number...
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