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Evergrande weighing on Asian markets

China equities bashed on return to work

Wall Street had a very noisy and choppy session overnight, buffeted by an impending FOMC, Evergrande, slowing growth prospects, Covid-19, the US debt ceiling, and the future of the Democrat’s $3.5 trillion spending bill; chose your crisis. When the dust settled, a few day traders were probably licking wounds, but the main indexes closed not too far from where they finished the day before. The S&P 500 closed just 0.08% lower, the Nasdaq rose 0.22% in a tech-safety play, and the Dow Jones edged 0.14% lower. US futures are almost unchanged in Asia, erring to the heavy side.

The return of Mainland China markets hasn’t been a happy one. Despite a CNY 100 bio liquidity injection from the PBOC, and news that a local Evergrande unit will make a local bond coupon payment tomorrow, equity markets have headed south. Evergrande is due to also make an offshore coupon payment tomorrow and there has been no word on whether this will happen, and that could be keeping local equities subdued. The Shanghai Composite has fallen by 1.90% today as Evergrande contagion fears take centre stage. The CSI 300 is 1.10% lower while Hong Kong markets are closed for a public holiday.

The negative day for China has spilled over to regional markets. The Nikkei 225 is 0.50% lower after the BOJ left policy unchanged. After two days of holidays, South Korea remains closed, but Taipei is playing catchup after a return from holidays, the TAIEX slumping by 2.20%. Singapore is 0.60% lower while Kuala Lumpur is down 0.40% while Jakarta is bucking the trend, helped by rebounding commodity and energy prices, rising 0.90%.

Rebounds in iron ore and copper, along with surging energy prices has lifted Australian markets by mid-session, after a slow start. The Evergrande local unit coupon payment news has also lifted sentiment, although Australian markets, seizing on any snippet of good news could be getting ahead of themselves, as no news has emerged on whether an offshore coupon, also due tomorrow, will be paid. Nevertheless, Australian markets are now solidly in the green, the ASX 200 jumping higher by 0.70%, and the All Ordinaries rallying 0.90%.

Given the neutral finish by Wall Street, and the negative tone pervading Asia, and with the FOMC to come later today, European stocks are likely to adopt a cautious stance this afternoon, remaining vulnerable to negative headlines emanating from China. The increasing noise surrounding the gas price rally is also likely to dampen spirits in today’s session.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley [4]

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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