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Asia Markets On Alert As Evergrande Crisis Continues to Unfold

Uncertainty over whether the struggling property giant paid interest on an offshore bond due last week and the absence of any action from Beijing have left traders in limbo

 

Asia’s equity markets responded positively on Monday to Wall Street’s Friday lead, though the gains were minor as investors nervously watched continuing developments at troubled Chinese property giant Evergrande.

Hong Kong was among the best performers with bargain-buying after suffering a blow-out last week, though traders were still none the wiser about whether Evergrande had paid any interest on an offshore bond that was due last Thursday.

While concerns about an economically disastrous collapse of the firm have receded for now, analysts warned there was a long way to go before markets were out of the woods.

 

Also on AF: China’s Power Crunch Begins To Weigh on Economic Outlook

 

Reports at the weekend said Chinese authorities had ordered local housing chiefs to store the company’s cash in ring-fenced accounts to make sure it is used to complete construction projects.

Observers said the move showed homeowners were the priority for the government as it tries to temper social anger. But Beijing has remained largely silent on the crisis, leaving many to second-guess its plans.

Hong Kong rose but Evergrande’s electric-vehicle unit slumped by more than 9% after it scrapped a proposed listing on the Shanghai Stock Exchange and warned it was running out of cash.

The Hang Seng Index added 0.07%, or 16.62 points, to 24,208.78. The Shanghai Composite Index fell 0.84%, or 30.24 points, to 3,582.83, while the Shenzhen Composite Index on China’s second exchange sank 1.14%, or 27.68 points, to 2,406.56.

Sydney, Seoul, Singapore, Manila, Mumbai and Bangkok were all in positive territory, though Wellington and Jakarta dipped.

 

JAPAN ELECTION

Tokyo was flat, days ahead of a leadership election in Japan’s ruling party to replace Prime Minister Yoshihide Suga, with optimism that the winner will push for a huge new stimulus package for the stuttering economy.

The benchmark Nikkei 225 index edged down 0.03%, or 8.75 points, to end at 30,240.06, while the broader Topix index slid 0.14%, or 3.01 points, to 2,087.74.

“Markets seem to be rapidly pricing in Evergrande as a fully controllable outcome that won’t spill over China’s borders into the wider financial universe,” OANDA’s Jeffrey Halley said.

But Shane Oliver, at AMP Capital, warned: “Global fears around contagion from Evergrande have receded a bit but it’s too early to sound the all-clear. Shares remain vulnerable to short-term volatility.”

The upbeat start to the week followed gains for the S&P 500 and Dow in New York, where dealers have taken in stride the Federal Reserve’s plan to start tapering its ultra-loose monetary policy.

 

US DEBT LIMIT

But there is growing concern about US lawmakers’ failure to lift the debt limit to pay its bills, putting in danger of a default that several people, including Treasury Secretary Janet Yellen, warn would cause an economic catastrophe.

The row comes as Republicans dig in against Joe Biden’s multi-trillion-dollar Build Back Better programme that would invest in climate change policy, lower childcare and education costs for working families and create millions of jobs.

Bitcoin was moving at around $44,000, having largely recovered over the weekend from a plunge below $40,000 that came in reaction to news that China had deemed all financial transactions involving cryptocurrencies illegal, sounding the death knell for the country’s digital trade.

Meanwhile, Brent oil prices jumped to around three-year highs just short of $80 a barrel, on concerns about tightening supplies as demand recovers owing to the reopening of economies from the pandemic.

 

MARKETS

Tokyo – Nikkei 225: FLAT at 30,240.06 (close)

Hong Kong – Hang Seng Index: UP 0.1% at 24,221.03

Shanghai – Composite: DOWN 0.8% at 3,582.83 (close)

New York – Dow: UP 0.1% at 34,798.00 (close)

 

  • AFP with additional editing by Sean O’Meara

 

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Sean OMeara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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