Asian markets were largely off as China, South Korea, Taiwan, and Japan were all closed today.
Asian markets were largely off as China, South Korea, Taiwan, and Japan were all closed today. Markets were off for the Mid-Autumn Festival but it was stocks and not leaves falling today in a crushing rout in Hong Kong. The broad Hang Seng Composite Index only had 39 advancers and 449 declining stocks. Fears that highly indebted real estate developer Evergrande is going to collapse crushed Hong Kong with a particular emphasis on real estate and financial stocks though internet stocks weren’t spared from the downdraft. Markets have felt jittery following a strong run from US equities in advance of potential Fed tapering, turning down the financial nitrous oxide, with Evergrande’s situation leading to some chips coming off the table. Is Evergrande going to default? Several years ago, three highly indebted Chinese companies teetered on collapse (HNA, Anbang, Fosun). The collapse of those companies could have led to a domino effect of one company taking out its lenders/banks, which would have led to a widespread financial crisis. However, Chinese policymakers would not allow those companies to threaten the financial system. Similarly, I believe Evergrande will be taken over, broken up, and liquidated as it is too big to fail, just as we saw a few years ago. CNH, China’s offshore currency that trades 24 hours a day, did depreciate versus the US Dollar -0.21%/-0.01 while CNH’s volatility jumped +13.
