China Evergrande crisis rocks markets from Hong Kong to U.S.

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Nikkei Asia 20 September, 2021 - 03:53pm 39 views

How much does evergrande owe?

The Evergrande Group owes roughly $300 billion, and investors fear a default could destabilize the financial system in China, one of the world's top economies. NPRFrom Evergrande To Delta Variant, 3 Things To Know About The Stock Sell-Off

HONG KONG/NEW YORK -- A wave of fear over Chinese economic growth swept through global markets on Monday as China Evergrande, the country's most indebted property developer, teetered on the brink of default and investors worried about the consequences for its domestic peers and international commodity prices.

While Chinese and Hong Kong property groups bore the brunt of the sell-off, the impact was felt across European and U.S. stock markets. China Evergrande, whose liabilities amount to almost a third of a trillion dollars, is facing deadlines this week for payments to banks and bondholders.

In the U.S., the Dow Jones Industrial Average finished down 614 points, or 1.8% to close its worst day of trading since July. Caterpillar and Goldman Sachs were the benchmark's biggest losers on a day when investors were also watching the outlook for the Federal Reserve's cutbacks to monetary easing. The Dow fell 972 points at its low point before paring its losses toward the end of the session. 

The repercussions from Evergrande's prospective collapse will likely contribute to China's ongoing economic deceleration, which in turn anchors global growth and inflation, and casts a pall over commodity prices," said Phoenix Kalen, a strategist at Societe Generale in London.

The Nasdaq closed down 2.2% and the top three decliners were all Chinese companies: Pinduoduo, Baidu, and JD.com. The S&P 500 finished down 1.7%. It was both indexes' worst day of trading since May. 

The Global X MSCI China Real Estate ETF, an exchange-traded fund focused on the Chinese property sector, closed down 5.4% for the day. 

In Europe, London's FTSE 100 slipped almost 1% with miners leading the retreat on concerns a China slowdown will further erode commodity prices. The Euro Stoxx 600 index fell nearly 1.7%.

Iron ore prices fell below $100 a ton for the first time in over a year, as China's imposition of more steel production curbs combined with investor concerns that a real estate construction slowdown will cut demand for the metal. Copper declined 2%, as did oil. American steelmaker Nucor had the second-worst performance on the S&P, closing down 7.6%

Global economic growth is closely entwined with the fortunes of China, which was the only major economy to expand last year. In April, the International Monetary Fund projected China would contribute over a fifth of the increase in the world's gross domestic product in the five years to 2026.

While the Chinese economy recovered swiftly from the pandemic-induced slowdown, signs have emerged of growth losing steam, particularly in the housing market where activity slumped sharply in July and weakened further in August.

Evergrande shares slumped a further 10.2% Monday in Hong Kong, taking losses for the year to 84%. The Hang Seng Property Index tumbled 6.7% to its lowest level since 2016 and the broader Hang Seng Index ended down 3.3%. Chinese markets are closed till Wednesday for holidays, but the FTSE China A50 index futures traded in Singapore declined over 3%

Evergrande has begun offering suppliers and retail debt investors apartments, parking lots and commercial space in lieu of missed payments. It faces a series of bond coupon payments starting Thursday, and if it does not make the payments within a month it will be termed a defaulter.

"Our baseline remains that any potential default or restructuring of Evergrande would be carefully managed by the government with limited contagion effect in both financial and property markets," said Goldman Sachs economists led by Hui Shan. "This would require a clear message from the government soon to shore up confidence and to stop the spillover effect, the absence of which we think poses notable downside risk to growth in Q4 and next year."

However, the economists warned if a default occurred without clear "ring-fencing" of the spillovers to other parts of the economy, then the outcomes would be harsher, perhaps as much as a 4.1% hit to GDP as housing activity collapses and financial conditions tighten.

S&P Global Ratings also said it did not expect "a large systemic event if Evergrande defaults." But in a note to clients, it said the situation could worsen if a disorderly bankruptcy of the group coincided with a deeper market downturn in the sector. "This would set off a vicious cycle. We believe that the sector itself is already seeing some weakness in sales and pricing since August and could slip further."

Shares in Sinic Holdings, a Shanghai property developer, crashed 87% before trading was halted. Investors fear the company may struggle to refinance a $246 million bond it must repay on Oct. 18, now that investors have soured on the sector. Fitch Ratings last week cut its outlook on the company to negative.

Large Hong Kong developers also felt the negative impact. Sun Hung Kai Properties sank 10%, its largest decline since 2012, and Henderson Land tumbled 13%, with investors also spooked by a Reuters report last week that Beijing has warned the territory's property tycoons it will no longer tolerate "monopoly behavior."

China's biggest insurer Ping An fell as much as 8.4%. The company said on Friday it had no exposure to Evergrande and that its insurance investment fund had equity investments worth 63.1 billion yuan ($9.8 billion) linked to real estate developers, which it said were largely financially sound.

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A China (Evergrande) Hit To Metals?

CNBC-TV18 20 September, 2021 - 06:30pm

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The moves add to the wall of worry facing investors ahead of the Federal Open Markets Committee policy decision on Wednesday, a key test for Evergrande on Thursday, and imminent sparring about the U.S. debt ceiling and fiscal stimulus.

“Many pieces are in place for the kind of decline that will surprise almost everybody,” said Matt Maley, chief market strategist at Miller Tabak + Co. “Even though a lot of people are calling for a mild correction, we think the odds are much higher that the decline will be a deep one.”

Read More: Hong Kong Stocks Sink as Property Fear Spreads Beyond Evergrande

Here is a graphical look at some of the key issues facing investors and how they are positioned:

Angst about the world’s most-indebted developer is spreading as senior Chinese policy makers stay silent on whether the government will step in to prevent a messy collapse. It has sparked the biggest selloff in Hong Kong property stocks in more than a year and dragged down everything from banks to Ping An Insurance Group Co. and high-yield dollar debt.

Interest payments on two Evergrande bonds come due Thursday, a key test of whether the company will continue meeting obligations to debt holders even as it falls behind on payments to banks, suppliers and holders of onshore investment products in China.

The epic selloff in iron ore continued amid a rout that’s brought prices below $100 a ton. Futures in Singapore fell to $95 on Monday as China’s push to rein in its steel output hammers demand. Iron ore has more than halved since rising to a record in May with some market participants saying a decline to $70 is a possibility.

For Treasury bears -- the majority of Wall Street -- this week’s Fed meeting represents one of the last prospective triggers this year for a decisive break higher in yields. Traders are anticipating officials will hint at a plan to curb bond buying and are ready for a shift in the central bank’s new forecasts for its benchmark rate.

Primary dealers surveyed by Bloomberg News predict on average that 10-year yields will be more than 30 basis points higher by year-end. Yet the yield curve has flattened by the most since the early days of the pandemic, suggesting there is still the possibility of a dovish surprise.

Speculators have boosted their bearish bets against the Australian dollar to record levels amid the slump in iron ore, lockdowns across the country to prevent the spread of the coronavirus and dovish exhortations from central bank chief Philip Lowe.

Net-short non-commercial futures and options positions on the currency grew to the most on record last week, according to the latest data from the Commodity Futures Trading Commission. But as a key vehicle for risk on/off bets in the FX market, the bearish positioning is also likely influenced by growing pessimism about the strength of the global recovery.

Hedge funds are also growing increasingly bearish on emerging-market stocks -- seen by many as particularly sensitive to a Fed taper tantrum. Leveraged fund positions on futures linked to the MSCI Emerging Markets Index flipped to net short for the first time in more than a year, according to data from the Commodity Futures Trading Commission.

The gauge of developing-market equities has tumbled 8% this quarter -- underperforming its developed-markets peer by about 10 percentage points -- weighed down as well by Beijing’s crackdown on private enterprise.

The S&P 500 Index has fallen for eight out of the last 10 sessions, albeit with a modest enough decline of just over 2%. The U.S. equity benchmark is sitting around its 50-day moving average, which has provided robust support for much of the year. The key technical level has become a closely-watched flashpoint as investors brace for a key week for determining market direction into quarter-end.

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LONDON (Reuters) -Oil dropped more than $1 a barrel to around $74 on Monday as rising risk aversion weighed on stock markets and boosted the U.S. dollar, while more U.S. Gulf oil output came back online in the wake of two hurricanes. The U.S. dollar, seen as a safe haven, rose as worries about Chinese property developer Evergrande's solvency spooked equity markets and as investors braced for the Federal Reserve to take another step towards tapering this week. "Far East stock markets and the strong dollar are affecting oil," said Tamas Varga of oil broker PVM.

(Bloomberg) -- The backdrop of interest rates remaining low to aid slowing economic growth supports maintaining longer-term positions in high quality, secular growth stocks, according to Goldman Sachs Group Inc.“The persistently low overall level of interest rates that our economists expect, and their forecast for real GDP growth that should decelerate to a below-trend pace of 1.5% by the end of next year, should continue to support profitable long duration stocks with high quality attributes,”

A bond market tantrum that drives up yields can be a fearsome prospect for central banks but the U.S. Federal Reserve might just welcome a sell-off that lifts Treasury yields towards levels that better reflect the robust state of the economy. Persistently low yields are a feature of bond markets across the developed world, with central banks mostly in no hurry to raise interest rates and a global savings glut that keeps debt securities in constant demand. Even with growth tipped to surpass 6% this year and a "taper" in sight for the Fed's bond-buying programme at the end of this year, 10-year yields are still stuck at just above 1.3%..

WASHINGTON (Reuters) -European capitals celebrated a visit by U.S. Secretary of State Antony Blinken in June, as President Joe Biden's top diplomat cracked jokes in French in Paris, posed for selfies with French youth and spoke at length about revitalizing the transatlantic relationship. It was a breath of fresh air after four years of former President Donald Trump's brash "America First" administration, during which U.S. ties with Europe lurched from one crisis to another amid policy decisions that often blindsided European countries. But less than three months after Blinken's repair tour, Washington finds itself in an unprecedented diplomatic crisis with France over a trilateral deal with Britain to supply Australia with nuclear-powered submarines that sank a $40 billion contract for French-designed vessels.

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Senior Democrats said on Sunday that they will likely need to scale back President Joe Biden's $3.5 trillion social spending bill while passage of the linked bipartisan infrastructure bill may slip past a Sept. 27 deadline. House Speaker Nancy Pelosi also may delay sending the $1.2 trillion infrastructure measure after House passage to the White House for Biden's signature until the larger spending bill passes, House Budget Committee Chairman John Yarmuth told "Fox News Sunday" - a move aimed to ensure that moderate Democrats support the bill.

Spot gold fell 0.3% to $1,748.13 per ounce by 0500 GMT, having earlier touched its lowest level since Aug. 12 at $1,741.86. The market is starting to think that a taper announcement could be imminent and that there could be a hawkish surprise in the dot plots, Stephen Innes, managing partner at SPI Asset Management, said.

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US regulators are believed to be expanding their investigation of Binance to include possible insider trading at the cryptocurrency exchange.

President Joe Biden wanted booster shots to be ready as soon as this week, pending FDA approval, because “we wanted to be ready," Fauci said.

Advisory panel dealt blow to Biden with Friday verdictMillion deaths avoidable if vaccinations increase, adviser saysVaccinations among Latinos rise thanks to community outreach Dr Anthony Fauci speaks during Senate testimony in July. Photograph: Stefani Reynolds/AFP/Getty Images A decision not to recommend third-shot booster vaccinations for most Americans is “not the end of the story”, White House chief medical adviser Dr Anthony Fauci insisted on Sunday, two days after a scientific panel appe

China's sweeping regulatory crackdown of recent months does not aim to rein in the country's private enterprises or decouple from the United States or international financial markets, a top Chinese regulatory official told Wall Street leaders last week. The actions instead intend to strengthen the regulation of consumer-facing platform companies with a key role in promoting "common prosperity", or easing wealth inequality, China Securities Regulatory Commission (CSRC) Vice Chairman Fang Xinghai said at a private gathering, according to attendees.

Shares of embattled property giant China Evergrande Group tumbled again Monday, sending Hong Kong’s broader stock market lower as contagion fears spread.

Investors are no doubt reacting to the continuing weakness in Hong Kong and shares of China’s Evergrande Group.

(Bloomberg) -- Sinic Holdings Group Co. has halted trading after an 87% slump in its shares Monday afternoon. The Shanghai-based developer didn’t give any reason for the trading halt in Hong Kong. The sudden selloff in the last two hours leading up to the suspension was accompanied by a surge in trading volume that was about 14 times its average in the past year, according to Bloomberg-compiled data. The company has a 9.5% $246 million bond due on Oct. 18 and Fitch Ratings revised its outlook to

Top news and what to watch in the markets on Monday, September 20, 2021.

(Bloomberg) -- Stocks in Europe plunged and U.S. equity futures declined at the start of a week abounding with risks including spillover from China Evergrande Group’s debt woes, falling commodity prices and the Federal Reserve policy meeting. Treasury yields fell.The Stoxx Europe 600 index dropped 1.9%, on track for the biggest decline in two months. Raw materials led the broad-based retreat as iron ore extended a slump below $100 a ton after China stepped up restrictions on industrial activity.

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U.S. stock futures fell sharply on Monday, with those for the Dow Jones Industrial Average tumbling 500 points, as Hong Kong-listed property companies came under fresh pressure. Investors also were positioning ahead of this week’s Federal Open Market Committee meeting. How are stock futures trading?

Debt payment deadline looms for China property developer Evergrande

CNBC Television 20 September, 2021 - 06:30pm

Evergrande Isn't Having a Lehman Moment, Says UBS' Baweja

Bloomberg Markets and Finance 20 September, 2021 - 06:30pm

China's Evergrande: What to know

Fox Business 20 September, 2021 - 08:52am

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The Carlyle Group co-founder David Rubenstein discusses China’s potential 'Lehman Brothers moment' amid the Evergrande crisis, U.S. debt and his new book, ‘The American Experiment.’

One of China's largest lenders, Evergrande Group, is facing billions of debt with the threat of default. The crisis is sending shockwaves through global financial markets, including in the U.S., where the company is being compared to Lehman Brothers, whose implosion in September 2008 sparked the Great Financial Crisis. 

FOX Business takes a look at Evergrande's business and its role in the world's financial system. 

Evergrande is one of China's leading lenders for everything from property to autos. The company has 2.3 trillion Chinese yuan in assets, which equates to about $355 billion in USD, according to the lender, which employs 200,000 workers. 

By 2022, Evergrande expects to reach 3 trillion yuan in total assets, 1 trillion yuan of annual sales and 150 billion yuan of annual profits and taxes to become  "one of the world's top 100 companies." 

Rating agencies say Evergrande Group appears unlikely to be able to repay all of the 572 billion yuan ($89 billion) it owes banks and other bondholders, as reported by the Associated Press, which also noted Beijing is likely to step in to prevent systemic damage.

"I suspect the Chinese government is on top of this, and I don’t doubt they will deal with it severely, but I don’t think it will have the global effects the market is suggesting this morning,"  said Carlyle Group co-founder David Rubenstein during an appearance Monday on "Mornings With Maria."

One U.S. investor in China tells FOX Business "just about every bank in China has exposure to the company," which explains the heightened contagion fears. 

According to Factset data, BlackRock has some holdings in Evergrande across several units, while Goldman Sachs, JPMorgan and JPMorgan have small, fractional holdings. "I don't think the major US banks are on the hook for very much money," Rubenstein noted. 

Inquiries by FOX Business to these banks were not immediately returned. 

As the lender's crisis continues to unfold, it has attempted to calm investor fears.

"The recent online remarks about Evergrande’s bankruptcy and reorganization are completely untrue," the company said Sept. 13. "The company has indeed encountered unprecedented difficulties, but the company resolutely fulfills its corporate responsibility, goes all out to resume work and production, guarantee the delivery of buildings, try all means to resume normal operations, and fully protect the legitimate rights and interests of customers" 

Xu Jiayin, also known as Hui Ka Yan, is among China's richest people with a net worth of over $10 billion, according to Forbes. Xu took the lender public on the Hong Kong Stock Exchange in 2009. 

"61 years old, Chairman of the Board of Directors of the Group and Chairman of the Real Estate Group, Professor Xu coordinates the overall development strategy of the Group. He has more than 37 years of experience in real estate investment, real estate development and corporate management. Professor Xu has been a professor of management at Wuhan University of Science and Technology since 2003 and was hired as a doctoral supervisor of the school in 2010."  

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