Asian markets experienced a sharp decline in early Monday trade, propelled by a downturn in US tech stocks and escalating apprehensions regarding China property sector. Hong Kong, in particular, witnessed a significant dip of over two percent in shares, with major developer Country Garden at the forefront of the losses. The company’s towering debt has ignited concerns of a potential bankruptcy that could potentially disrupt the fragile Chinese economy.
Country Garden Stocks Decline
Country Garden, an influential privately-owned real estate giant featured in Forbes’ prestigious list of the world’s 500 largest companies, experienced a staggering decrease of more than 16 percent in its stocks by 11:00 am (0300 GMT).
The firm, once considered financially robust, faced a setback last Monday when it was unable to fulfill two bond payments. With a 30-day grace period, the company’s risk of defaulting in September looms large if the payments remain unmet. Over the weekend, Country Garden made a significant announcement to suspend trading of onshore bonds from Monday onward. This decision has sent ripples of concern across the markets, given that the company’s total debt was estimated at a substantial 1.15 trillion yuan ($159 billion) by the end of 2022.
Country Garden’s potential collapse could have dire consequences comparable to its heavily indebted counterpart, Evergrande, casting a shadow of uncertainty over China’s financial system and economy.
China’s Third Quarter
According to Stephen Innes of SPI Asset Management, “China Property Sector’s third quarter has commenced on a frail note, with declining exports and imports in July, China Property Sector developer reportedly failing to make a bond payment, and both CPI and PPI inflation entering negative year-over-year territory, primarily due to escalating food prices.” This confluence of factors, Innes explains, is severely impacting China’s two major growth drivers – exports and property – thereby exerting a detrimental influence on both local and broader ASEAN risk markets.
This market turmoil extended beyond Hong Kong, as Singapore encountered a drop of more than one percent, while Tokyo experienced a decline of 0.9 percent. Shanghai, Bangkok, and Jakarta also suffered losses.
Wavering Stock Market Trends
Last Friday, stock markets exhibited wavering trends following the release of US data indicating a more substantial-than-anticipated surge in wholesale inflation. Additionally, traders were deliberating on the probability of further interest-rate hikes this year. The week concluded with mixed results in the US markets, with the tech-rich Nasdaq Composite Index sliding by 0.6 percent, while the Dow Jones Industrial Average managed to close up by 0.3 percent.
Market observers are now intently focused on forthcoming developments, particularly the US retail sales report for July and the minutes from the July 26 Federal Open Market Committee meeting, which are anticipated to provide crucial insights into the economic trajectory ahead.
Source: Yahoo
