Business

Evergrande crisis spill beyond China

China Evergrande have put investors on guard for evidence that the crisis may be spilling over into broader markets. Evergrande was once China’s top-selling property developer. They owe $305 billion and has run short of cash. Investors are worried that a collapse could pose systemic risks to China’s financial system. There have been few signs of stress in money and credit markets. Stan Shipley, fixed income strategist, at Evercore ISI in New York said that the linkage of Evergrande’s debt to other global financial actors is modest. He added that as a result the risk of contagion is small. China has more than enough financial resources to dampen a possible bankruptcy.

In this fraught situation, some investors have forgotten the money market blow-ups during the 2008 global financial crisis. The coronavirus pandemic that shook the global economy and led to massive bailouts from central banks.

Some key barometers of market stress investors are watching, such as the U.S. LIBOR-OIS, which measures the difference between secured and unsecured lending in the United States. This is seen as one measure of strain in money markets. Then the FX SWAPS, cross currency swaps that allows the investors to raise funds. In other words, investors have to pay around 11 basis points over interbank rates. Next is the VOLATILITY IN BONDS, FX, STOCKS. Volatility for the three asset classes such as the stocks, bonds, currencies. And that has remained comparatively subdued. Lastly, the CREDIT DEFAULT SWAPS, that offers insurance on corporate bond holdings. A higher price on the CDS index indicates investors are less concerned about potential high-yield defaults. The spread of the ICE BofA High Yield Index, is in line with the CDS index.

Related Topics:business China Evercore Evergrande

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COP26 delegates agree on need to deliver on $100 BLN climate finance pledge

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City’s exposure to Evergrande is very minimal-Hong Kong finance Chief

Hong Kong’s exposure to debt-laden developer China Evergrande Group is very minimal at 0.05%. This is of banking assets, South China Morning Post reported, citing the city’s finance minister. Financial Secretary Paul Chan told the newspaper that it is very minimal and won’t cause them any systemic risks. He added that he had arrived at the conclusion after a recent audit of the local banking sector’s exposure to the company.

Chan also said that the Hong Kong’s stock market was inevitably subject to some volatility. This is amidst a recent mainland crackdown on some industries. But still he believed any setback would be temporary. With liabilities of $305 billion, Evergrande has sparked concerns its cash crunch could spread through China’s financial system. This may reverberate globally and that is a worry that has eased with the Chinese central bank’s vow, to protect homebuyers’ interests. Evergrande has missed two bond interest payments. Bondholders have said this and its offshore debt, amounting to about $20 billion, trades at distressed levels.