Asian markets struggle to gain a foothold as investors worry about Evergrande crisis
- Hang Seng loses 0.3%, yuan struggles to recover
- Chinese yuan recovers drop in offshore trade on Monday
- Nikkei drops 2% after Monday public holidays
SINGAPORE, Sept.21 (Reuters) – Asian stocks struggled to shake off contagion fears on Tuesday and selling pressure persisted as problems with indebted developer China Evergrande could spill over into the economy, markets and the global financial system.
The Hong Kong Hang Seng (.HSI) hit a new 11-month low and was down 0.3% at mid-session as early gains by banks and real estate stocks edged down a bit. Japan’s Nikkei (.N225) returned from a market holiday with a decline of nearly 2%.
Currency, commodities and bond markets have stabilized, but overall demand for riskier assets remained weak, especially as the Federal Reserve is expected to move closer to the cut on Wednesday.
European futures rose 0.5% in the Asian session. FTSE futures rose 0.7% and S&P 500 futures rose 0.6% per day after selling successful banks on both sides of the Atlantic and rocking the S&P 500 to its biggest drop in two months.
“For markets to rebound, we need to see concrete action from the authorities to stem any large-scale contagion,” said Dave Wang, portfolio manager at Nuvest Capital in Singapore.
Although China was on vacation and mainland markets were closed, there was still little evidence of this, with no mention of Evergrande’s problems in mainstream Chinese state media.
Evergrande, who is struggling for money, owes $ 305 billion and investors run the risk of a disorderly failure spill over into China’s real estate industry and everything exposed to it – primarily the banks, then the economy at the bottom. wider.
The Chinese yuan stabilized in offshore trading to recover some of the losses that took it to a three-week low on Monday. Evergrande shares (3333.HK) fell 4% as attention shifted to Thursday when the company is due to make bond interest payments.
The Australian stock market (.AXJO) was also barely better than flat as iron ore miners BHP (BHP.AX) and Rio Tinto (RIO.AX) broke nine-month lows reached on Monday. Copper hovered near a one-month low on demand fears.
“There is caution in the market,” said George Boubouras, head of research at K2 Asset Management in Melbourne.
“However, the earnings cycle is far from being a bear market,” he said. “Evergrande is definitely a sentiment issue. But no Lehman event… it will be dealt with, bailed out or restructured if it becomes a notable issue in mainland China.”
The next few days will feature yet more tests, with the Federal Reserve concluding a two-day meeting on Wednesday and likely to offer hints on the outlook for reduction and Evergrande due to honor its bond interest payments on Thursday.
In the currency market, traders took comfort in the relative calm in Hong Kong following Monday’s plunge.
The euro traded at $ 1.1730, after hitting a nearly a month low at $ 1.1700 while the safe haven yen slipped to 109.57 yen to the dollar.
The 10-year US Treasury yield climbed to 1.3277%, with moves capped as markets keep tabs on the Fed.
Investors research the timing of its bond purchases as well as the long-term rates and economic projections of its board members.
“I think the Fed is going to calm things down and I guess they will postpone their cut decision until November,” said Jarrod Kerr, chief economist at Kiwibank.
This week will also see the policy decisions of many other central banks covering Brazil, Britain, Hungary, Indonesia, Japan, Norway, Philippines, South Africa, Sweden, Switzerland, Taiwan and Turkey.
Oil prices also rebounded slightly in Asia after falling the day before. US crude futures were trading at $ 70.98 per barrel.
Flickering cryptocurrencies also found a bottom, with bitcoin rebounding from a month-and-a-half low to $ 40,193 to trade at just under $ 43,000. Read more
(This story corrected a typographical error in the title)
Additional reporting and writing by Tom Westbrook; Editing by Shri Navaratnam and Ana Nicolaci da Costa
Our standards: Thomson Reuters Trust Principles.