China’s Evergrande default concerns loom large on nervous market
News Desk || shiningbd
The risks of China’s Evergrande Group defaulting on its mountain of debt loomed large over nervous markets on Tuesday, as investors looked for signs of intervention by Beijing to stem any potential domino effect across the global economy.
Analysts played down the threat of Evergrande’s troubles becoming the country’s “Lehman moment”, though concerns about the spillover risks of a messy collapse of what was once China’s top-selling property developer have roiled financial markets.
“We believe Beijing would only be compelled to step in if there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy,” according to an S&P report dated September 20. “Evergrande failing alone would unlikely result in such a scenario.”
Still, troubles could further hit investor confidence in China’s property sector and junk-rated credit markets more broadly, the credit assessor said.
In an effort to assuage investor anxiety, Evergrande Chairman Hui Ka Yuan said in a letter to staff, the company is confident it will “walk out of its darkest moment” and deliver property projects as pledged, local media reported on Tuesday.Aljazeera
In the letter, coinciding with China’s mid-autumn festival, the chairman of the debt-laden property developer, also said Evergrande will fulfil responsibilities to property buyers, investors, partners and financial institutions.
Investors in Evergrande, however, remained on edge.
Its shares were sold off again on Tuesday, and fell as much as 7 percent after tumbling 10 percent in the previous day on fears its $305bn in debt could trigger widespread losses in China’s financial system in the event of a collapse.