Global stocks fluctuate due to concerns about the Evergrande ‘debt bomb’

Global stocks fluctuate due to concerns about the Evergrande 'debt bomb' 5

Global stocks fluctuate due to concerns about the Evergrande ‘debt bomb’

The S&P 500 just recorded its worst trading session since May when it lost 1.7% on September 20.

The Dow Jones Industrial Average also headed for its biggest monthly decline since last October.

Not only in the US, last night, sell-off also took place globally.

Growing concerns about Evergrande’s debt crisis dragged down everything from bank stocks to Ping An Insurance Group and dollar bonds.

Hong Kong real estate giants also suffered their biggest selling spree in more than a year.

Developments of Wall Street’s main indexes in the September 20 session.

Concerns are growing about the default risk of Chinese real estate developer Evergrande Group, the biggest `debt bomb` of any publicly traded real estate development or management company

Market participants are increasingly worried Beijing will continue its efforts to rein in industries and let Evergrande, which owes tens of billions of dollars to investors around the world, collapse.

`This is a threat to global growth,` said Ilya Feygin, managing director at WallachBeth Capital.

According to Bloomberg, many investors are choosing to sell first and ask questions later, faced with uncertainty about how far Mr. Xi is willing to go with his market campaigns to achieve `shared prosperity.`

Chinese policymakers may be able to avoid a financial crisis, but the Evergrande ordeal could still cause lasting damage, Societe Generale SA analysts wrote in a note to investors.

`The consequences of Evergrande’s future collapse are likely to contribute to China’s ongoing economic slowdown, which in turn will drag on global growth and inflation, and affect commodity prices.`

Global stocks fluctuate due to concerns about the Evergrande 'debt bomb'

Analysts fear Beijing will let Evergrande collapse and damage shareholders and bondholders.

In the Financial Times last week, billionaire George Soros even warned that Evergrande’s default could cause the Chinese economy to collapse.

Concerns about Evergrande also appear at the same time as investors are increasingly cautious about the prospects of the stock market, after a series of recent consecutive increases.

Meanwhile, analysts point to signs that the economic recovery in the US has faded as the Delta variant spreads.

For much of the summer, individual and institutional investors flocked to the stock market.

Still, market sentiment quickly changed in September. Many investors are bracing for more volatility, and some say they are forecasting lackluster returns throughout.

Analysts at Citigroup, Deutsche Bank and Bank of America all warned about risks in the US stock market in updated reports earlier this month.

Still, some analysts say they don’t expect Evergrande’s financial woes to spill over to other parts of the world and that the stock market sell-off will be short-lived.

Frank Benzimra, head of investment strategy for Asia at Société Générale, said that Evergrande is unlikely to lead to a `Lehman moment` – the financial shock following the collapse of Lehman Brothers in 2008.

JPMorgan analysts said in a flash report yesterday that the market sell-off was exacerbated in part by technical factors such as options hedging, as well as poor liquidity.

`Our market forecasts remain unchanged and we view the sell-off as a buying opportunity,` a team of experts led by JPMorgan’s Marko Kolanovic wrote in a report to investors today.

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