The main unit of China Evergrand Group has said it will make a coupon payment on its domestic bond schedule, which will give some relief to troubled markets for fear of the Chinese No. 2 developer spreading through a default global financial system.
Hengda Real Estate Group said in a statement on Wednesday that it would make coupon payments on its Shenzhen-traded 5.8 percent September 2025 bond on September 23rd.
The announcement comes as the country’s top-selling developer, EverGrand, announces an inch grand near the key deadline for paying interest on dollar bonds, even as investors and analysts reject the threat of problems that could become the country’s “Lehman” moment. The largest U.S. investment bank went bankrupt in 2008 in the wake of the subprime mortgage crisis.
According to refinance data, the coupon payment of Hengda Real Estate totaled 232 million Chinese Yuan ($ 35.88 million).
“We are still trying to understand what this money means for other bonds but I think they will want to stabilize the market and make other coupon payments, check-in,” said a source familiar with the situation, who declined to be identified. They are not allowed to speak to the media.
U.S. stock futures, the yuan and the risk-sensitive Australian dollar rose, while safe-haven assets such as the yen and U.S. treasuries declined.
Evergrand is ready to pay its onshore bonds on time but the developer did not indicate on Thursday whether it would be able to pay 83 83.5 million in interest due to its March 2022 bond. It has an additional payment of 5 5.5 million for the 2nd September 20224 note.
If Evergrand fails to settle interest within 30 days of the due payment date, both bonds will default.
Trading on Evergrand’s onshore exchange-traded bonds has been suspended since September 16, when Hengda Real Estate applied for a one-day suspension of trading. When technically resuming trading a day later, it now only happens through negotiated transactions that traders say try to prevent instability.
U.S. stocks were flat on Tuesday and Chinese shares fell in early trade after a two-day public holiday, amid concerns over a spiral over a tumultuous fall on Monday. But China’s property index recovered losses and was up more than one percent, while banking stocks were up nearly one percent.
Evergrand is so deeply involved in China’s larger economy থেকে from retail investors to infrastructure-related companies that measure global commodity demand যা that the risk of infection has put financial markets on tentacles.
Analysts at New York-based Bespoke wrote in a research paper on Tuesday, “There is a general concern about the possibility of infection. “But so far those concerns have not been seen in some parts of the credit market that have served as a red flag for the larger credit crisis in the past.”
China’s central bank has helped boost sentiment by injecting short-term cash into the financial system amid concerns over the global iledon crisis in Evergrande.
The People’s Bank of China (PBOC) has paid 120 billion yuan ($ 18.6bn) to the banking system through a reversal agreement, resulting in a perfect injection of 90 billion yuan ($ 13.9bn).
Eugene Leo, a senior rate strategist at DBS Bank Ltd. in Singapore, said, “The net injection of PBOC is probably aimed at calming the nerves.”
Concerns over Evergrand’s debt woes need to calm market shocks amid the recent loss of China-related equities around the world.
Evergrande on Monday failed to pay interest to its at least two of the largest bank creditors, Bloomberg news agency quoted people familiar with the matter as saying on Tuesday. According to Bloomberg, the Chinese Ministry of Housing said the company was unable to make timely payments and missed payments were expected.
As global investors and policymakers try to assess a possible fall, Gary Gensler, chairman of the Securities and Exchange Commission (SEC), said the U.S. market is in a better position to absorb potential global shocks from a large company default before 2007. -2009 financial crisis.
Position to raise funds
Federal Reserve Chairman Jerome Powell will likely be asked about the consequences of Evergrand when he speaks after the Fed’s two-day meeting, which ends at 2pm ET (1800 GMT) on Wednesday. The Federal Reserve is commonly known as the Fed.
Despite growing defaults, some funds have been increasing their position in recent months. Fund giant BlackRock and investment bank HSBC and UBS Evergrand are among the biggest buyers of debt, Morningstar data and a blog post showed.
Other bondholders include UBS Asset Management and Amundi, Europe’s largest asset manager.
In any default situation, tensions between Evergrand, a chaotic melddown, a managed fall or the likelihood of a bailout in Beijing are low, bonds need to be restructured, but analysts expect a lower recovery ratio for investors.
The S&P Global Ratings said Monday that it believes the Chinese government will work on far-reaching transitions that pose a systemic risk to the economy.
“I would identify Evergrand as a telegraph and controlled explosion,” said Sami Muaddi, portfolio manager at the 1 5.1 billion T Row Price Emerging Markets Bond Fund, which has no position in the company.
BNP Paribas estimated in a research paper that less than ভার 300 billion of Evergrand’s 300 300 million was financed by outstanding bank loans, suggesting that there would be adequate buffers to exploit potential bad loans in the Chinese banking sector.
Citigroup Inc. Subsidiary acts as a trustee and payment agent for a China Evergrand bond that matures in March 2022 and is coming in at due 2.5 million in interest on Thursday.
“We have no direct lending exposure to Evergrande; Our indirect exposure through counterparty credit risk is small and without any significant significant concentration, ”Citigroup spokesman Daniel Romero-Apsilos said in an email on Tuesday. He declined to comment on Evergrand’s payment.
Evergrand’s Hong Kong-listed shares fell as much as 7 percent on Tuesday, down 10 percent from the previous day, amid fears that its ৫ 505 billion debt collapse could cause massive damage to China’s financial system. Hong Kong’s stock market was closed for the holiday on Wednesday.