China real estate crisis, gasoline price drops and what matters in the market

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Why China’s housing crisis worries the world

The housing crisis in China increasingly poses a threat to the growth of the world’s second largest economy and, consequently, to global activity as a whole.

Here in Brazil, the impacts of the slowdown of its biggest trading partner are also starting to appear.

Understand: The real estate sector is very relevant to the Chinese economy – it represents almost a third of the GDP – and ends up impacting several other activities. Remember the fear generated by the Evergrande default?

• The real estate market was one of the foundations for the country’s robust growth in recent years, following the migration movement from rural areas to large centers.

Why is there a crisis? The advancement of the sector was based on the advance purchase of real estate. Meanwhile, developers continued to launch units, whose sales helped finance the works in progress.

• These “pre-sales” account for 70% to 80% of new home sales in China.

• The problem is that population growth has slowed down, and the current slowdown in the economy has further hampered the sale of new units – in July alone the drop was 40% compared to the previous year.

• Without seeing an evolution in the construction of their apartments, the owners started to stop paying the financing. These “boycotted loans” can total $145 billion (R$ 735 billion), according to an estimate by S&P Global.

On Sunday, data highlighted the slowdown in local retail and industry, which are also affected by Covid Zero policies. Indicators pushed oil and iron ore prices down.

Government reacts: After restricting loans to developers in 2020 fearing a bubble, China has now issued $148 billion (R$750 billion) to help the real estate sector, according to the Financial Times.

• The Communist Party also announced new measures to stimulate the economy after data showing weakening activity.

Another gas price cut

Petrobras announced a cut of 4.8% in the price of gasoline at its refineries as of this Tuesday (16).

The drop represents a retreat of BRL 0.18 per liter in refineries and BRL 0.13 per liter at gas stations, considering the mixture with ethanol.

What explains: the cut follows the downward trend in international oil prices in the face of fears of a global recession, which causes lower demand for the commodity.

• At the opening of the market, the average price of Brazilian gasoline was BRL 0.33 per liter above the import parity, according to calculations by Abicom, an association of importers.

In history: this is the third gasoline price reduction announced by the company in less than a month. Last week, the state-owned company also announced the second consecutive reduction in the price of diesel.

Nubank has a new president and surpasses Santander

In the announcement of its results in the second quarter, Nubank announced an internal restructuring, recorded an increase in the number of customers and in revenue, but also saw an increase in delinquency in its loan portfolio.

Restructuring: Youssef Lahrech, the company’s director of operations for two years, becomes the holding’s new president, taking care of day-to-day operations.

• He will report to David Vélez, global CEO and founder of the digital bank, which is now prioritizing long-term strategy, such as “product development, expansion into new markets and new acquisitions”, the institution said.

• Other Nubank executives, including co-founder and president in Brazil, Cristina Junqueira, will report to Lahrech.

In numbers: the digital bank reported adjusted net income of $17 million (R$ 86 million). Compared to the second quarter of 2021, the number of customers increased 57%for 65.3 million of users.

• revenue grew 230% on this basis of comparison, for US$ 1.2 billion.

In Brazilits main market, Nubank reached 62.3 million of customers at the end of June, up 51% over a year earlier. Fintech became the fifth largest bank in Brazil in terms of number of customers, surpassing Santander Brasil.

Bad debt grows: the digital bank saw its delinquency rate over 90 days jump from 3.5% to 4.1% in a quarter, in the midst of a scenario of high interest rates, which makes credit more expensive.

• The increase in the number of debtors in banking institutions was expected and has been closely monitored by the market.

Cell phone rental may be an option for 5G

5G should reach all the capitals of the country by the end of the year, but that does not mean that the service will become popular soon. One of the obstacles to the massive adoption of the technology is the prices of devices compatible with the fifth generation connection.

Those eager for new technology who don’t want to spend a hefty sum on a new cell phone can find an alternative in rental plans, called Phone as a Service.

Understand: in this modality, the consumer pays a monthly fee to have access to the newest models and can change versions frequently.

• It is an option mainly for those who cannot afford the cash price of a high-end smartphone.

In numbers: an iPhone 13 goes out by BRL 7,600 at Apple’s official store, while a Galaxy S22 costs BRL 6,000 on Samsung. The rental price for these devices varies around BRL 390.

Delay: Faced with difficulties in installing filters on cell phone antennas and satellite dishes to “clean” the 5G frequency, the 5G committee predicts further delays in the deployment of the technology in 15 capitals until the end of November.