The Federal Open Market Committee will hold its two-day policy meeting ending September 22, with the decision due early on Thursday in Australia. And unsurprisingly, it is the Fed at the top of the list of potential market movers. Now, those same financiers are facing large write-offs, potentially impairing their appetite to provide further credit to the sector.įinancial markets will be looking to central banks this week, and chiefly the US Federal Reserve, for signs a world of higher interest rates lies ahead even as the COVID-19 pandemic poses an ongoing challenge to a much hoped for economic recovery.Ĭentral banks in Japan, Britain, Switzerland, Sweden and Norway are meeting amid elections in Canada and Germany.
But Evergrande’s enormous debt pile left it vulnerable to a weaker property market. Housing construction has been an engine of economic growth and individual wealth creation. The construction giant’s model is to borrow money to buy up state land, and then build homes en masse.Īn Evergrande plaza in Beijing, with a map showing its development projects in China. The growing fear is that its demise, and the losses the banks and bondholders that provided the $US350 billion of debt will have to swallow, could trigger a contagion event similar to what the US experienced in September 2008, which led to the collapse of the Lehman Brothers investment bank.Įvergrande, which went public in 2009, is one of China’s most important companies. Over the weekend, the topic du jour among the macro community was whether the looming default of Chinese construction giant Evergrande marks a Lehman Brothers moment for the world’s second-largest economy. They were joined by suppliers who said they had also not been paid. Last week, hundreds of retail investors protested at Evergrande’s headquarters in the southern city of Shenzhen, after executives said they needed more time to pay the interest and principal on high-yielding wealth management products issued by the group.
The Hang Seng Property index, which tracks a dozen listed developers, was down more than 6 per cent and Chinese insurer Ping An, whose stock dipped 5 per cent on Friday amid fears of contagion from Evergrande’s mounting debt troubles, fell almost 8 per cent. Hong Kong-listed shares in Evergrande fell as much as 15 per cent in early trading on Monday, while broader concerns about the health of China’s real estate sector triggered a wider sell-off. The admission comes ahead of a critical fortnight for the developer, which is struggling to repay investors, banks and bondholders, as well as complete flats for home buyers who paid for their new properties in advance.Įvergrande’s mounting debt troubles are sparking contagion fears. Six senior Evergrande executives face “severe punishment” for securing early redemptions on investment products that the indebted Chinese property group subsequently told retail investors it could not repay on time, the company has said.