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Evergrande Bond Payment Report Lifts Asia Markets’ Spirits

The mood in Hong Kong was boosted by news that the ailing real estate giant had made an important offshore interest payment – just before Saturday’s deadline


But after a strong start to the week, the Asian rally has faded over the past two days. AFP photo.

 

Asia’s major markets crept ahead on Friday boosted by a report that troubled developer China Evergrande had paid interest on an overdue bond a day before the deadline, easing concerns over a default.

There was also another record-breaking lead from Wall Street, as more positive earnings reports provided a further lift with the S&P 500 hitting its first all-time high since the start of September, with traders optimistic that companies are weathering surging inflation, supply chain snarls and slowing economic growth.

Surging prices around the world and central banks’ moves to end their financial largesse have acted as a major drag on markets for months with the prospect that the era of cheap cash is coming to an end.

 

China Evergrande Averts Default With $83m Bond Payment

 

“The bout of investor nervousness has proven transitory, even as inflationary signals persist,” said Geir Lode, at investment manager Federated Hermes.

“Equity markets are back on the rise as investors shrug off their recent concerns, with major indices near all-time highs. Earnings season is now underway in the US and while it is early days, the initial flurry of earnings have been well received.

“The supply squeeze combined with increased demand is particularly challenging, but blue-chip companies that can prove their ability to maintain profitability in an inflationary environment are likely to be well rewarded.”

With South Korea, Singapore and New Zealand among the countries already lifting interest rates – and the Bank of England expected to act soon – all eyes are on the Federal Reserve, which has indicated it will begin winding back its bond-buying programme by the year’s end.

But after a blockbuster start to the week, the Asian rally petered out in the past two days. Tokyo, Hong Kong, Sydney, Singapore, Mumbai and Jakarta rose but there were losses in Shanghai, Seoul, Wellington, Taipei and Manila.

The mood in Hong Kong was lifted by a report that Evergrande had made that key offshore interest payment – just before Saturday’s deadline – on an offshore bond.

 

Shock Waves Fear

Fears that the property giant could collapse and send shock waves through the Chinese economy have rattled buyers and markets, and shares plunged as the group resumed trading Thursday after a two-week halt.

But on Friday, the state-backed Securities Times said the firm had wired an $83.5 million payment first due on September 23, citing “relevant channels.” Saturday was the last day of a 30-day grace period.

However, the company has several other payments to make before the end of the year and traders will be closely watching to see if it can meet those, too.

“They may be able to pay this interest, and maybe they can pay another interest – basically they have an interest payment every two weeks or so – but at some point… there’s going to be an amount of principal maturing, and that one’s multi-billion,” Chen Long, partner at research firm Plenum, told AFP.

“If you look at the fundamentals of the company, that hasn’t changed.”

 

Debt Obligations

Shares in the firm rose more than 4% in Hong Kong, though that came a day after a drop of more than 12% sparked by its announcement that the planned sale of its property services unit had fallen through.

It had also warned that it could not guarantee meeting its debt obligations, reigniting fears of contagion in the vast property sector and wider Chinese economy.

The Hang Seng Index rose 0.42%, or 109.40 points, to 26,126.93. Evergrande climbed 4.26%. The Shanghai Composite Index dipped 0.34%, or 12.18 points, to 3,582.60, while the Shenzhen Composite Index on China’s second exchange edged down 0.15%, or 3.51 points, to 2,412.67.

The benchmark Nikkei 225 index added 0.34% or 96.27 points to 28,804.85, a weekly loss of 0.91%. The broader Topix index edged up 0.07% or 1.42 points to 2,002.23. Over the week, it declined 1.07%.

Bitcoin fell as profit-takers moved in after the digital currency hit a new record of $66,976 on Thursday. It was sitting at around $63,200 in afternoon Asian trade.

 

MARKETS

Tokyo > Nikkei 225: UP 0.3% at 28,804.85 (close) 

Hong Kong > Hang Seng Index: UP 0.4% at 26,126.93 (close)

Shanghai > Composite: DOWN 0.3% at 3,582.60 (close)

New York > Dow: UNCHANGED at 35,603.08 (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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