Market impact from Evergrande debt woes

HSBC Holdings PLC CEO says that they are expecting the debt problems involving embattled property developer China Evergrande Group to have an impact on capital markets. But there is no direct impact on the bank seen by them. Noel Quinn said at a Bank of America conference that he would be naive to think that the turmoil in the market doesn’t have the potential to have second-order and third-order impact. This news was reported according to a webcast on HSBC’s website. He also added that the Evergrande’s situation was concerning, particularly on the capital markets and the bond markets. And they have got to stay close to that.

HSBC’s Hong Kong-listed shares rose 1.8% in early trade. This is in line with gains in the broader market. HSBC’s shares recovered from a 10-month low struck. Evergrande faced a deadline to pay interest on one of its dollar bonds. This was a crucial moment for global investors who were worried that its malaise could spread beyond the country’s property sector. Quinn said that HSBC was very focused on its commercial real estate business in China and Hong Kong. He added that they are focusing typically on Tier 1 cities, Tier 1 properties, Tier 1 lenders. And they are having a well-managed exposure. They are also not unduly concerned by that exposure. Quinn said that HSBC’s loan loss provisions in Hong Kong and China as outlined in its half-year results indicated that the lender was not concerned about its commercial real estate exposure in China. According to Quinn, nothing has happened in the recent weeks that will change that position in his mind for them as a bank, as an institution.