Asian markets feel drag of Evergrande and power shortage in China
28 September 2021 - 07:18
byScott Murdoch
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A man wearing a protective mask walks past an electronic board displaying Japan’s Nikkei index outside a brokerage in Tokyo, Japan, on September 21 2021. Picture: REUTERS/KIM KYUNG-HOON
Hong Kong — Asian shares mainly drifted lower on Tuesday as investors continued to fret over China Evergrande Group’s unsolved debt crisis and eyed the potential impact of a widening power shortage in China.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.13% lower on Tuesday, after a mixed session on Wall Street
In early trade Tuesday, Australia’s benchmark S&P/ASX200 index was down nearly 1%, while Japan’s Nikkei was off 0.6%.
China’s blue chip index CSI300 edged up 0.1% at the open, as Hong Kong’s Hang Seng index gained 0.44%.
The future of Evergrande, the world’s most indebted property developer, is being forensically scrutinised by investors after the company did not meet a deadline last Friday to make an interest payment to offshore bond holders. Evergrande has 30 days to make the payment before it falls into default and Shenzen authorities are investigating the company’s wealth management unit.
Without making reference to Evergrande, the People’s Bank of China said on Monday in a statement posted to its website that it would “safeguard the legitimate rights of housing consumers”.
Widening power shortages in China, meanwhile, halted production at a number of factories, including suppliers to Apple and Tesla and are expected to hit the country’s manufacturing sector and associated supply chains. Analysts cautioned the blackouts could affect the country’s listed industrial stocks.
“What we see in China with the developers and the blackouts is going to be a negative weight on the Asian markets,” Tai Hui, JPMorgan Asset Management’s Asian chief market strategist said.
“Most people are trying to work out the potential contagion effect with Evergrande and how far and wide it could go. We keep monitoring the policy response and we have started to see some shift towards supporting home buyers which is what we have been expecting.”
On Wall Street, the Dow Jones Industrial Average rose 144.36 points, or 0.41%, to 34,942.36, the S&P 500 lost 4.57 points, or 0.10%, to 4,450.91 and the Nasdaq Composite dropped 68.29 points, or 0.45%, to 14,979.41.
Rising bond yields prompted a shift from growth to cyclical stocks in the US, in a move that analysts expect could become more permanent after a prolonged period of suppressed bond yields.
US treasury yields soared to a three-month high, touching 1.516% overnight after the Federal Reserve’s move last week to indicate fiscal stimulus could be tapered as early as November.
US investors are looking ahead to speeches later this week from senior Fed officials, as well as keeping an eye on any developments at China Evergrande, broker Ord Minnett said in a note.
In Asian trade, the dollar was up nearly 0.1% in line with its performance in the international session Monday after it rose alongside bond yields. Gold was flat, while Brent crude oil was down 0.2%.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Asian markets feel drag of Evergrande and power shortage in China
Hong Kong — Asian shares mainly drifted lower on Tuesday as investors continued to fret over China Evergrande Group’s unsolved debt crisis and eyed the potential impact of a widening power shortage in China.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.13% lower on Tuesday, after a mixed session on Wall Street
In early trade Tuesday, Australia’s benchmark S&P/ASX200 index was down nearly 1%, while Japan’s Nikkei was off 0.6%.
China’s blue chip index CSI300 edged up 0.1% at the open, as Hong Kong’s Hang Seng index gained 0.44%.
The future of Evergrande, the world’s most indebted property developer, is being forensically scrutinised by investors after the company did not meet a deadline last Friday to make an interest payment to offshore bond holders. Evergrande has 30 days to make the payment before it falls into default and Shenzen authorities are investigating the company’s wealth management unit.
Without making reference to Evergrande, the People’s Bank of China said on Monday in a statement posted to its website that it would “safeguard the legitimate rights of housing consumers”.
Widening power shortages in China, meanwhile, halted production at a number of factories, including suppliers to Apple and Tesla and are expected to hit the country’s manufacturing sector and associated supply chains. Analysts cautioned the blackouts could affect the country’s listed industrial stocks.
“What we see in China with the developers and the blackouts is going to be a negative weight on the Asian markets,” Tai Hui, JPMorgan Asset Management’s Asian chief market strategist said.
“Most people are trying to work out the potential contagion effect with Evergrande and how far and wide it could go. We keep monitoring the policy response and we have started to see some shift towards supporting home buyers which is what we have been expecting.”
On Wall Street, the Dow Jones Industrial Average rose 144.36 points, or 0.41%, to 34,942.36, the S&P 500 lost 4.57 points, or 0.10%, to 4,450.91 and the Nasdaq Composite dropped 68.29 points, or 0.45%, to 14,979.41.
Rising bond yields prompted a shift from growth to cyclical stocks in the US, in a move that analysts expect could become more permanent after a prolonged period of suppressed bond yields.
US treasury yields soared to a three-month high, touching 1.516% overnight after the Federal Reserve’s move last week to indicate fiscal stimulus could be tapered as early as November.
US investors are looking ahead to speeches later this week from senior Fed officials, as well as keeping an eye on any developments at China Evergrande, broker Ord Minnett said in a note.
In Asian trade, the dollar was up nearly 0.1% in line with its performance in the international session Monday after it rose alongside bond yields. Gold was flat, while Brent crude oil was down 0.2%.
Reuters
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