Mainland China markets resume trading, Evergrande crisis
SINGAPORE — Markets in mainland China fell more than 1% on Wednesday’s open before bouncing back slightly amid the ongoing Evergrande crisis, as markets reopened for trade after a two-day holiday.
Investors kept an eye on China’s markets to see if there was any fallout from the troubled developer, as global markets fell earlier in the week.
Both the Shanghai composite and Shenzhen component dropped more than 1% in early trade, before easing off on some of those losses. While the Shanghai Composite was at 0.29%, its component in Shenzhen fell 0.813%.
The CSI 300 index which measures the most valuable stocks in China fell by more than 1%.
The holiday saw markets in Hong Kong closed. After a plunge of more than 3% on Monday, Hang Seng recovered some losses by Tuesday.
Investors will be looking for evidence of government intervention to stop Evergrande’s disorderly default. In a Wednesday note, DBS Singapore wrote that market turmoil regarding the developer increased in past trading sessions because investors saw the lack of government support for Evergrande’s distressed company as evidence of the absence.
Evergrande’s The bank stated that shares in Hong Kong fell 10.6% Monday and Tuesday, bringing year-to-date losses of 85% to the total.
The Evergrande unit Hengda made a payment of coupon on its domestic bonds Thursday, which may have calmed investor sentiment. Still, questions remain over whether the interest on Evergrande’s offshore U.S.-dollar denominated bond — also due Thursday — will be made.
Data from the central banking showed that the People’s Bank of China injected substantial liquidity into the market through reverse repurchase agreements. This means the bank bought short-term debts from certain commercial lenders to increase their cash supply.
China’s benchmark lending rate remained unchanged on Wednesday, while the 1-year loan prime rate (LPR), remained at 3.85%. 5.65% remained as the five-year LPR. According to Reuters, this was in line with analysts and traders’ expectations.
Other Asia-Pacific markets
Elsewhere in Asia, the Nikkei 225 in Japan slipped 0.59% while the Topix index shed 0.79%.
The Taiex in Taiwan dropped 1.97%. In Australia, the S&P/ASX 200 edged 0.83% higher. South Korea was on holiday.
The MSCI’s Asia-Pacific share index outside Japan was 0.32% less.
Bank of Japan holds steady on policy
The Bank of Japan on Wednesday held steady on monetary policy, keeping its short-term interest rate target at -0.1% while that for 10-year Japanese government bond yields was kept at around 0%.
In its latest monetary policy statement, the Japanese central bank stated that employment and income are “still weak” because of the Covid effect. Private consumption is “still stagnant” as a result of the sustained downward pressure on services consumption.
The Japanese yen traded at 109.42 per dollar, having strengthened from around 110 against the greenback earlier this week.
Overnight stateside, the Dow Jones Industrial Average dipped 50.63 points to 33,919,84 while the S&P 500 declined around 0.1% to 4,354.19. Outperformers were the Nasdaq Composite, which rose 0.22% to 14,746.40.
The policy statement of the U.S. Federal Reserve is expected Wednesday in the US. Investors are looking forward to this announcement for information on the timing and extent of the bank’s bond buying program.
Currencies and oil
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 93.229 after sliding from levels above 93.3 earlier in the week.
The Australian dollar changed hands at $0.7251, against an earlier low of $0.7221.
Oil prices were higher in the morning of Asia trading hours, with international benchmark Brent crude futures up 0.71% to $74.89 per barrel. U.S. crude futures The price of a barrel rose by 0.92%, to $71.14