World shares jolted by Evergrande crisis as debt payment test looms By Reuters
By Hideyuki Sano
TOKYO (Reuters) – Global stock markets on Tuesday were caught in the grip of contagion fears sparked by troubles at China Evergrande as growing risks the property giant could default on its massive debt prompted investors to flee riskier assets.
In Asia, selling pressure continued ahead of Evergrande’s Thursday payment of $83.5 million for interest in connection to the March 2022 bond. Another $47.5million payment is due September 29 for the March 2024 bonds.
Evergrande must settle both the interest and the bonds within 30 days from the payment date or they will go bankrupt.
Trade resumed Monday after a holiday and fell 2.3%. Meanwhile, MSCI’s Asia-Pacific broadest index outside of Japan dropped 0.2%.
MSCI’s ACWI fell 0.13 percentage, just a day following a plunge of 1.63% in the gauge representing the 50 major stock exchanges around the globe. It is now at its lowest level for two months.
The markets in Taiwan and China are closed on Tuesday due to the mid-Autumn celebration, while Korean markets will remain open through Wednesday.
On Wall Street, shed 1.70%, the biggest drop in four months. Nasdaq’s Golden Dragon China index of U.S. listed Chinese shares fell 5.4%, putting it near its 15-month lowest point.
Evergrande shares, which have been trying to raise money to pay many of its lenders, suppliers, and investors, dropped 10.2% Monday.
China’s financial system could be exposed to greater risks if the $305 billion in liabilities is not stabilized, according to regulators.
“Whether Evergrande is able to make its payments and, if so, will the authorities bail it out?” These are immediate questions,” Masahiro Ishikawa, Chief Strategy Officer at SumitomoMitsui (NYSE) DS Asset Management said.
Investors fear that China’s struggling property sector could cause ripple effects throughout the international economy. This is a critical engine of China’s remarkable economic growth.
Ichikawa stated that slower Chinese growth could have a longer-term impact on the economies of neighboring countries.
In the currency market, the weakened to 6.4830 per dollar.
The euro traded at $1.1726, after having touched a near-one-month low of $1.1700 while the safe-haven yen ticked up to 109.39 yen to the dollar
The 10-year U.S. Treasuries yield dropped to 1.312%, though moves were relatively subdued as investors looked to the U.S. Federal Reserve’s two-day policy meeting starting on Tuesday.
Investors want to know the timing of its bond purchases and its long-term rates.
Many other central banks from countries such as Brazil, Hungary, Indonesia and Japan will be making policy decisions this week. These include the United Kingdom, Hungary, Japan, Norway. South Africa. Sweden, Switzerland. Taiwan.
Asia’s oil prices saw a slight recovery after falling on the previous day. Futures were traded at $70.68 per barrel.
The cryptocurrency market was hit by a decrease in risk appetite, as bitcoin fell to $42,454 at 1 1/2 months.