ASX surges on energy stocks, Aussie dollar rises as Evergrande calms market

The main unit of the China Evergrande group said on Wednesday that it would pay a coupon on its domestic bonds on September 23, offering some relief to nervous markets worried that a default by China’s No.2 developer could spill over into the situation. global financial. system.

Hengda Real Estate Group said in a statement that it will make the coupon payment on its 5.8% Shenzhen-traded bond in September 2025 on time on September 23.

The announcement comes as Evergrande, once the nation’s best-selling developer, approaches a key deadline for paying interest on a dollar bond, with financial markets strained even as investors and investors alike. Analysts have played down the threat that his problems will become the country’s “Lehman”. moment.”

Hengda Real Estate’s coupon payment is 232 million yuan ($ 35.88 million), according to data from Refinitiv.

“We’re still trying to figure out what this payment means for the other bonds but I imagine they would want to stabilize the market and make other coupon payments, given the scrutiny,” said a source close to the situation that refused to be identified as they are not allowed to speak to the media.

Futures on US stocks, the yuan and the risk-sensitive Australian dollar rose, while safe-haven assets such as the yen and US Treasuries fell.

The Australian dollar rose 0.49% to 72.68 cents US before giving up some of the gains to trade at $ 0.7247, up 0.2%.

Evergrande is expected to make its onshore bond payment on time, but the developer has not indicated whether it will be able to pay $ 83.5 million in interest owed on its March 2022 bond on Thursday. He has another payment of $ 47.5 million due on September 29 for the March 2024 tickets.

Both bonds would default if Evergrande does not pay the interest within 30 days of the scheduled payment dates.

As concerns about the fallout from a disorderly collapse rocked markets on Monday, US stocks were flat on Tuesday and Chinese stocks fell early in the session after a two-day public holiday. But the Chinese real estate index recouped its losses and rose more than 3%, while bank stocks fell around 3%.

Evergrande is so deeply tied to the wider Chinese economy – from retail investors to infrastructure-related companies that are an indicator of global commodity demand – that contagion fears have held financial markets in suspense.

“There have been quite a few concerns about the possibility of contagion,” analysts at New York-based Bespoke wrote in a research note Tuesday. “But so far that concern has not manifested itself in parts of the credit markets which have served well as red flags for larger credit crises in the past.”

Evergrande failed to pay interest owed Monday to at least two of its largest bank creditors, Bloomberg reported on Tuesday, citing people familiar with the matter. The missed payments were expected as China’s Housing Ministry said the company would not be able to pay on time, Bloomberg said.

As investors and policymakers around the world tried to assess the potential fallout, Securities and Exchange Commission (SEC) Chairman Gary Gensler said the U.S. market was better positioned to absorb a potential global shock. ‘a major corporate default than it was before 2007 – 2009 financial crisis.

Reuters