🏙🇨🇳 Investors in China Evergrande, the world’s most indebted property firm, have been left in the dark after the firm failed to pay a closely watched interest payment that came due on Thursday night. The missed $83.5m payment is seen as a key indicator of the firm’s financial health, though by itself it’s small beer. Evergrande owes more than $300bn to increasingly nervous investors, in a real estate industry that has anchored China’s economic growth for decades. Inside China, Evergrande is grappling with its obligations to small-time retail investors – who last week mobbed its Shenzhen headquarters to protest – as well as money it owes to suppliers and contractors across hundreds of building sites in China.
Perhaps the Chinese Communist Party will step in to restore the “governmental pillar of faith”, says Gillian Tett in the Financial Times. After all, it can just tell the People’s Bank of China what to do. On Wednesday markets rallied when Evergrande somehow found a way to avoid defaulting on its domestic bonds. Equally, the government has been clear it wants to reduce corporate debt and sky-high property prices, so it may choose to make an example of Evergrande. The result is that investors in China “do not know in whom or what to trust”.
No more Mr Nice Guys
🏦 ⛷Where have all the good bankers gone, asks Martin Vander Weyer in The Oldie. When I worked in finance in the 1980s, good-guy bankers were everywhere – “Gucci-shod globetrotters who prided themselves on their hinterland as much as their mastery of markets”. They did huge deals for huge clients, but still found time for other pursuits. There was David Scholey, director of the Bank of England and a jazz trumpeter; Win Bischoff, chairman of Lloyds and a dashing skier; and Michael Dobbs-Higginson, chairman of Merrill Lynch and a lay Buddhist monk. “These cosmopolitans did business, just as they socialised with each other, in a civilised way.”
But then, after the Big Bang in 1986, everything changed. City ownership rules opened and the power shifted, “from the client-handling polymaths and grandees to the trading-floor buccaneers”. Suddenly, pay scales soared. People hopped from firm to firm in search of big bonuses, destroying corporate loyalty. One-off deals became more important than long-term client relationships. And aggression became a more useful attribute than breadth of knowledge. Before, shared culture and intellect mattered. Now, “market power and the mathematics of money trumped all else”. No wonder so many, myself included, “departed with great relief”.
Hold the word salad
💬 😶 CEOs who use more complicated vocab deliver lower returns, according to new research by analysts at Nomura. The results are “dramatic”, says John Authers in Bloomberg. The Nomura boffins found the most plain-spoken bosses earned an average return of 15.4%, compared to just 9.45% for those with the most florid style. One egregious example comes from the disgraced former CEO of failed blood-testing firm Theranos, Elizabeth Holmes, who is now on trial for defrauding investors. “A chemistry is performed,” she told The New Yorker in 2014, “so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.” When CEOs “waffle” like this, says Authers, it’s because they’re making it up. Those who know exactly what they want, “express it clearly, and then do it”.