(Il Sole 24 Ore Radiocor) – The turbulence on the Asian markets, worried about the crisis of the Chinese real estate giant Evergrande, and the expectation for the top management of central banks scheduled for this week on both sides of the Atlantic penalizes European equity markets, which start the week in the red. In a session characterized by the closure of many Asian markets for holidays (including Tokyo and Shanghai), the attention of operators is turned to Hong Kong, where the Hang Seng index is down by 4%, affected by the -15% of Evergrande and the prospect that the Beijing government could extend regulatory tightening to the real estate sector. The Sydney stock exchange in Australia closed 2.1% lower, while the MSCI index of Asian markets (excluding Tokyo) fell to a one-month low.
Negative start of the week for the European stock exchanges after a last week session with two faces for Piazza Affari and the other continental lists. After an early part of the day with a good rise, sales in the session of Friday 17 September 2021 gradually took over, also thanks to the negative start of Wall Street combined with the technical shocks due to the four witches (the quarterly expirations of futures and options ) and European inflation above forecasts in August (3%). The price lists were also affected by the performance of mining stocks, which were affected by China’s decision to cut steel production, with a heavy effect on iron ore prices. All in a context of uncertainty, obviously, also due to the progress of the pandemic and the doubts on the maintenance of stimulus policies by the European Central Bank after the rise in inflation.
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Eyes on the crisis of the Chinese giant Evergrande
As for today’s appointments, in Italy the Ministry of Labor, Istat, Inps, Inail and Anpal disseminate the joint quarterly note on employment, while on a global level the attention is on the implications of the Evergrande case, the highly indebted Chinese real estate giant at risk crack. The liquidity crisis has hit China’s second largest real estate company which owns more than 1,300 real estate projects spread across over 280 cities. The company’s bonds were suspended following a further downgrade by the S & Poor’s rating agency. Failure to receive the coupons, as expected, should put the company in a phase in which the authorities intervene and sell some of the assets, but the scenario could become complicated.
What frightens Western markets is the possibility that the contagion escapes from China’s borders and spreads into the globalized world of finance and exists. A possible domino risk is linked to the exposure of Western hedge funds and mutual investment funds to the Chinese real estate sector and more generally to the eastern bond market. These exposures could result in automatisms and derisking policies to rebalance portfolios. These policies would force them to sell stocks that have nothing to do with China, real estate and so on.
The Evergrande chaos, however, is happening at an already delicate moment for Wall Street. The S&P 500 index – the most important in the world – closed seven of the last nine sessions in the red. It hadn’t happened since last February. A sign of weakness confirmed by the trend in open positions (open interest) of put option contracts on the S&P 500, close to the recent highs and for some weeks now above the threshold of 10 million contracts. This means that big investors are taking out insurance.