Asian markets rally as Evergrande fears fade and the Fed makes comments.
Investors were also encouraged by a Federal Reserve pledge to begin rolling back its ultra-loose monetary policy shortly, as concerns over the collapse of struggling property giant Evergrande faded for the time being.
After a midweek vacation, Hong Kong reopened to catch up on news that Evergrande had agreed to a plan to repay interest to its domestic bondholders, assuaging fears of a default that had sparked discussion of a hammer blow to the Chinese economy.
Despite the fact that Wednesday’s statement was poorly worded — not specifying how much or when it will pay – it was interpreted as a welcome sign. The focus now shifts to how it intends to handle repayments to offshore bondholders, which are due on Thursday.
Observers pointed out that even if the company fails to meet its responsibilities, it still has 30 days to pay up. They will, however, be watching how the dollar-denominated notes are handled.
Bernard Shaw, an Asia bond syndicate banker at Daiwa Capital Markets Singapore, said, “International investors will be watching for new occurrences and any state reaction, and assessing how contagious it can be for the rest of the economy.”
Hong Kong climbed more than 1%, with Evergrande temporarily rising 30 percent before easing back slightly — albeit its stock is still down more than 80% this year. Other property developers as well as banks with exposure to the company benefited as well.
The announcement on Wednesday, according to United First Partners’ Justin Tang, “demonstrated that maintaining bond solvency was still on Evergrande’s agenda and also encouraged hopes for investors that creditors are to some extent amenable to resolution.”
“The read-through is that other onshore and offshore creditors are still on the table for an orderly restructuring/negotiation, which could buy Evergrande some time.”
Sydney increased by 1%, but Mumbai and Singapore increased by much more. Shanghai, Wellington, Taipei, Manila, Bangkok, and Jakarta all scored higher than the national average. For a holiday, Tokyo was closed.
London, Paris, and Frankfurt were all open at the same time throughout Europe.
The good start to the day followed a one-percentage-point rise in all three major Wall Street indexes, as investors reacted positively to a Federal Reserve statement on slowing its massive bond-buying program.
The central bank stated that it hopes to be able to begin winding down stimulus “soon.” Brief News from Washington Newsday.