Global equities rocked by Evergrande crisis as debt payment test looms
TOKYO (Reuters) – Global equity markets on Tuesday were caught in the grip of contagion fears sparked by China Evergrande’s problems, as growing risks that the real estate giant could default on its massive debt prompted investors to flee riskier assets.
Selling pressure persisted as trading began in Asia ahead of a major test for Evergrande this week, which is due to pay $ 83.5 million in interest on its March 2022 bond on Thursday. It has another payment of $ 47. , $ 5 million due September 29 for the March 2024 banknotes.
Both bonds would default if Evergrande does not pay the interest within 30 days of the scheduled payment dates.
Japan’s Nikkei fell 2.0%, resuming trading after a market holiday on Monday, while the MSCI’s largest Asia-Pacific stock index outside of Japan fell 0.2%.
MSCI’s ACWI fell 0.13%, a day after the gauge of the world’s 50 stock markets fell 1.63%, its biggest drop in two months, and left it wobbling to its lowest level in two months .
Mainland China and Taiwan markets are still closed for a public holiday Tuesday for the Mid-Autumn Festival, while Korean markets remain closed until Wednesday.
On Wall Street, the S & P500 lost 1.70%, the biggest drop in four months. The Nasdaq Golden Dragon China index of U.S.-listed Chinese stocks fell 5.4% to close to the 15-month lows reached last month.
Shares of Evergrande, which is trying to raise funds to pay its many lenders, suppliers and investors, fell 10.2% on Monday.
Regulators have warned that its $ 305 billion in liabilities could trigger greater risks for China’s financial system if its debts are not stabilized.
“If Evergrande can make payments, and if not, if the authorities will bail him out?” These are the immediate questions, ”said Masahiro Ichikawa, chief strategist at Sumitomo Mitsui DS Asset Management.
Investors are also worried that problems in China’s real estate sector, one of the main drivers of the country’s rapid economic growth for decades, could have a ripple effect on the global economy.
“In the longer term, we could see a slowdown in Chinese growth hurt neighboring countries,” Ichikawa said.
In the currency market, the Chinese yuan weakened to 6.4830 per dollar.
The euro was trading at $ 1.1726, after hitting a nearly a month low at $ 1.1700 while the safe haven yen climbed to 109.39 yen to the dollar.
The yield on 10-year U.S. Treasuries fell to 1.312%, although moves were relatively subdued as investors turned to the two-day U.S. Federal Reserve policy meeting starting on Tuesday.
Investors research the timing of its bond purchases as well as the long-term rates and economic projections of its board members.
This week will 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 a bit in Asia after yesterday’s falls. US crude futures were trading at $ 70.68 per barrel.
Declining risk appetite hit cryptocurrencies, with bitcoin crashing to a one-and-a-half-month low of $ 42,454.
Additional reporting by Lewis Krauskopf in New York; Editing by Shri Navaratnam