Chinese Stocks Were Mixed Amid the Evergrande Crisis

Mainland Chinese stocks dropped more than 1% on Wednesday’s open before bouncing back slightly amid the ongoing China Evergrande crisis. Less than two weeks ago, disgruntled investors turned up at Evergrande’s headquarters in Shenzhen, demanding repayment of loans on overdue financial products. Homebuyers and investors also gathered in other cities. 

 With global markets selling off earlier in the week, investors monitored the China markets for any fallout encompassing the group. 

The Shanghai composite shrugged off all earlier losses. It was trading 0.23% higher in the afternoon. The Shenzhen component was not so lucky as it fell 0.354%.

In the meantime, the CSI 300 index that tracks the largest stocks listed in mainland China dropped 0.56%.

Markets in Hong Kong, as well as South Korea, are closed on Wednesday for holidays. Two days ago, Hong Kong’s Hang Seng index fell more than 3% before paring some losses on Tuesday.

Shares of China Evergrande Group in Hong Kong dropped 10.6% on Monday and Tuesday combined, taking year-to-date losses to 85%. 

The group’s unit Hengda announcement helped to improve investor sentiment. China Evergrande Group’s unit announced it will make a coupon payment on its domestic bonds on Thursday. Nevertheless, questions remain over whether the interest on the group’s offshore U.S.-dollar denominated bond – also due on Thursday- will be made. 

On Wednesday, the People’s Bank of China injected substantially more liquidity into the markets. It injected more liquidity through “reverse repurchase agreements” or buying short-term bonds from some commercial banks so banks have more cash on hand.

The country also left its benchmark lending rate unchanged, with the one-year loan prime rate (LPR) held steady at 3.85%. The five-year loan prime rate remained at 4.65%. 

 

Stocks around the world

In Japan, the Nikkei 225 fell 0.39% and the Topix index dropped 0.73%.

The Taiex in Taiwan fell 2.06%. In Australia, the S&P/ASX 200 added 0.7%. 

U.S. stocks were mixed on Tuesday. The Dow Jones Industrial Average dropped 50.63 points to close at 33,919.84. The S&P 500 fell around 0.1% to 4,354.19. The Nasdaq Composite gained 0.22% to 14,746.40. 

Inventors are waiting for the policy statement from the U.S. Federal Reserve. They are looking for signals on when the country’s central bank could taper its bond purchase program.