Thursday, July 7, 2022

Evergrande Falls Further Likely as S&P Chinese Bail Out

Stock and bond values ​​of China Evergrande Group fell further on Tuesday, fueling concerns about a wider impact after S&P Global Ratings warned Beijing was unlikely to bail out the developer.

Shares of Evergrande in Hong Kong fell as much as 7 percent on Tuesday before closing down 0.4 percent in Hong Kong, after falling 10 percent the previous day.

An S&P report released on Monday speculated that the Chinese regime would not directly support Evergrande, which puts the asset’s development on the verge of default.

“We believe Beijing will be forced to act only if a far-reaching contagion causes several major developers to fail and poses a systemic risk to the economy,” the report said.

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“Evergrande failing alone would be unlikely to result in such a scenario.”

As Bloomberg-compiled data shows, interest payments of about $120 million on the two Evergrande bonds mature on Sept. 23.

Thursday’s deadline is a crucial test of whether the developer will continue to meet its obligations to bondholders. At the same time, it has lagged behind in payments to banks, suppliers and holders of domestic investment products.

Investors bargain prices based on a strong probability of default, with a bond trading at less than 30 percent of face value.

Concerns over Evergrande’s ability to deal with $305 billion of liabilities have spread to Chinese capital markets. Shares of other local real estate companies also declined.

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China’s central bank injected $14 billion of short-term cash into its financial system on September 17, indicating authorities’ intent to ease market nerves.

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This News Originally From – The Epoch Times

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