Asian markets grapple with Evergrande fallout, eye China power crunch

Hong Kong, Sept. 28 (BNA): Asian stocks fell mainly on Tuesday as investors continued to worry about the unresolved debt crisis of China Evergrande Group and looked ahead to the potential impact of a widening energy shortage in China.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.13% on Tuesday, after a mixed session on Wall Street.

In early trading on Tuesday, Australia’s S&P/ASX200 was down nearly 1%, while Japan’s Nikkei was down 0.6%.

China’s blue-chip CSI300 rose 0.1% at the open, with Hong Kong’s Hang Seng up 0.44%.

The future of Evergrande, the world’s most indebted real estate developer, is under judicial scrutiny by investors after the company last Friday missed a deadline for paying interest to overseas bondholders, according to Reuters.

Evergrande has 30 days to make the payment before it defaults and Shenzen authorities are now investigating the company’s wealth management unit.

Without mentioning Evergrande, the People’s Bank of China (PBOC) said Monday in a statement posted on its website that it will “protect the legitimate rights of housing consumers.”

Meanwhile, a widening power shortage in China has halted production at a number of plants including suppliers to Apple Inc and Tesla Inc, and is expected to hit the country’s manufacturing sector and its associated supply chains.

Analysts warned that ongoing power outages could affect the country’s listed industrial stocks.

“What we see in China with developers and power outages will have a negative impact on Asian markets,” said Tai Hui, senior Asian market analyst at JPMorgan Asset Management.

“Most people are trying to figure out the potential impact of the infection with Evergrande and how far it could go. We’re continuing to monitor the policy response and are starting to see some shift toward home buyer support which we’ve been expecting.”

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On Wall Street, the Dow Jones Industrial Average rose 144.36 points, or 0.41%, to 34942.36, the S&P 500 lost 4.57 points, or 0.10%, to 4,450.91, and the Nasdaq Composite fell 68.29 points, or 0.45%, to 14,979.41.

Rising bond yields prompted a shift from growth to cyclical stocks in the US, in a move analysts expect could become more permanent long after pent-up bond yields.

US Treasury yields soared to a three-month high, touching 1.516% overnight after the Federal Reserve moved last week to signal that fiscal stimulus may wane as early as November.

Broker Ord Minnett said in a note that US investors are looking forward to speeches later this week from several senior Federal Reserve officials, as well as keeping an eye on any developments in China Evergrande.

In Asian trading, the dollar rose nearly 0.1% in line with its performance in the international session on Monday after rising alongside bond yields.

Gold was flat, while Brent crude was down 0.2%.


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