China wakes up
By Justin Pyvis – Delivered on 23 Sep 2021

Good morning! Melbourne is quite literally falling apart. Yesterday it was shaken yet again by more anti-vax mandate protests (more than 200 arrests) but also a 5.9 magnitude earthquake, which was felt across five Australian states and territories.

In response to the protests the Victorian government announced that it would double-down on mandatory vaccinations, adding all teachers and staff at early childhood learning settings to the scheme.

We don't know about you but outside of sectors where staff deal directly with the virus or the vulnerable (borders, health, aged care), we could probably come up with several better ways of getting people vaccinated than threatening to take away their jobs, which for whatever reason really seems to piss them off. 🙄

Moving to NSW, Premier Gladys Berejiklian fronted the media and confirmed that unvaccinated residents would remain in lockdown once the state reaches an 80% fully vaccinated rate. Unlike in Victoria vaccination won't be mandatory but it could be some time before they're "able to participate in events or activities".

Even at that point businesses will be permitted to restrict entry to the unvaccinated, such as at "major events where the organisers say they only want vaccinated attending or airlines where they say they only want vaccinated people flying with them".

Across the ditch, cracks started to appear in New Zealand's goal of COVID-zero after another 23 cases were reported in Auckland. According to Ashley Bloomfield, the country's Director-General of Health, the Kiwis may never get back to zero with the primary goal now vaccinations: "Get that vaccination rate up over 90%... that's absolutely our new means whereby we will be able to get back to the freedoms we had."

Fully vaccinated population (aged over 16)


Daily % change




10Y Bond






Brent (bbl)



Gold (oz)



Iron ore (t)






Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

The US S&P500 rallied 0.95% overnight after the Federal Reserve issued a statement broadly in line with expectations. The Fed effectively signalled that it "may" start to taper quantitative easing (government bond purchases) "soon", but interest rates won't be touched until at least 2022, according to its latest projections.

In local markets, having started the day weaker the ASX200 (+0.32%) was jolted into life after positive news flowed out of China regarding Evergrande's debt payment and an easing of liquidity (see the Feature below for more).

Iron ore gained around 10% on futures trading while markets were still open (before eventually finishing up 15%!), providing a solid kick up the backside for big miners such as FMG (+4.2%).


Ultra-easy: The Bank of Japan will not be joining other countries in the region in tightening monetary policy, confirming it will keep short-term rates at -0.1%, 10-year government bond yields at around zero and will buy bonds as required without an upper limit.

On shaky ground: RBA assistant governor Michelle Bullock warned that "sharp rises in housing prices that are not associated with fundamentals could lead to instability by raising the risk of a subsequent decline... Whether or not there is need to consider macro-prudential tools to address these risks is something we are continually assessing".

Translation – we helped inflate housing prices with ultra-easy monetary policy and are now considering offsetting that effect with a different type of market distortion before it gets even further out of our control.

China wakes up

Apologies for yet another China feature but it really is all the rage on financial markets at the moment. China woke up from its long weekend yesterday and very quickly two pieces of market-calming news were released:

• One, that Evergrande would make today's coupon payment (negotiated privately with bondholders, so presumably at a discount).
• Two, the People's Bank of China revealed it had boosted its daily liquidity injection to 120 billion yuan, the most since January.

Why this matters: This was a strong signal that China's government doesn't want to cut off its nose to spite its face. Markets loved it, with commodities such as iron ore bid heavily on the idea that China's property sector won't cool as much as initially feared.

Get real: Evergrande didn't actually pay the interest on its debt. Local bondholders likely took a haircut (possibly 'supported' by Beijing), allowing China's government to work behind the scenes on a potential restructuring – it has reportedly already assembled "accounting and legal experts to examine the finances of the group".

But restructuring doesn't magically turn good debt into bad so Evergrande's legacy will still linger, sapping some of the life out of the sector.

Looking forward: Evergrande will be backdoor-nationalised, enabling Xi Jinping to claim that he hasn't gone back on his promise to reduce debt in the property sector while also not technically bailing out a reckless billionaire.

Foreign bondholders (~5% of Evergrande's debt) will be hung out to dry, and Evergrande's founder Xu Jiayin – who together with his family pocketed 53 billion yuan of the 69 billion yuan it has paid in dividends since it listed – will have to make some hefty "common prosperity" donations or go the way of Jack Ma.

Crisis averted. Until the next one.

The Wrap Up
  • 🦠 A truck driver from NSW who was in WA between 16-17 September tested positive for COVID-19 on 18 September. No changes to restrictions were announced, although the next two days will be nervy with the AFL Grand Final scheduled for Saturday!
  • ❌ Full reversal – South Australia may keep its borders closed even after an 80% vaccination rate to states with "high levels of infection".
  • 💉 The Moderna vaccine is now available for walk-ins at nearly 500 WA pharmacies.
  • 🛂 NSW will start trialling its vaccine passport from 6 October. It will be built into the existing Service NSW app.
  • 📧 The SA Ombudsman found evidence of "corruption, maladministration or misconduct" within the state's Liberal Party in relation to its use and collection of data.
  • 🧒 Health Minister Greg Hunt said children aged between 5-11 could be vaccinated this year, encouraging Pfizer to apply for "Australian regulatory approval at the earliest possible time".
  • 🧭 The US House passed a bill to avoid a government shutdown on 1 October but it could still fail in the Senate.
  • 🚀 Priorities! Elon Musk said the next SpaceX tourism trip will include "upgraded toilets, a small oven for heating food and functioning Starlink Wi-Fi".
  • 📈 Young investors on TikTok are making trades based on Nancy Pelosi's monthly stock trading disclosures. US politicians are, in practice, exempt from insider trading laws.
  • 🕵️‍♀️ Lithuania's Defence Ministry recommended people throw away their Chinese-made phones, as they have a built-in ability to detect and censor terms such as "Free Tibet", "Long live Taiwan independence" or "democracy movement".
  • 🏳️ France will send its ambassador back to the United States following a phone call between Joe Biden and Emmanuel Macron.
  • 🎆 This should be interesting. Taiwan applied to join the CPTPP trade deal less than a week after China submitted its formal application.
  • ⚾ Former MMA champion Conor McGregor threw the first pitch ahead of the Chicago Cubs game yesterday and it was every bit as awful as you could have possibly imagined.
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