by SignalFactory · September 20, 2021 | 13:18:07 UTC
U.S. stock futures sold off Monday morning, tracking declines in overseas equities as investors nervously eyed the potential ripple effects of the default of a major Chinese real estate company and ongoing debates over the debt limit in Washington.
Dow futures sank by more than 500 points, or 1.6%, in early trading. S&P 500 futures also dropped by more than 1%, adding to losses from last week. The CBOE Volatility Index, or Vix (^VIX), jumped by more than 30% as a confluence of concerns roiled markets.
Shares of China Evergrande Group (3333. HK) plunged by more than 10% on the Hong Kong Stock Exchange as fears mounted that the Chinese real estate juggernaut would collapse under a major debt burden, impacting shareholders, bondholders and potentially triggering turmoil elsewhere across global markets. The specter of a broader crackdown by the Chinese government on Hong Kong’s real estate sector further added to concerns.
Evergrande has been scrambling to raise funds to pay its many lenders, suppliers, and investors, with regulators warning that it’s $305 billion of liabilities could spark broader risks to the country’s financial system if not stabilized.
“The stock will continue to fall, because there’s not yet a solution that appears to be helping the company to ease its liquidity stress, and there are still so many uncertainties about what the company will do in case of a restructuring,” said Kington Lin, managing director of Asset Management Department at Canfield Securities Limited.
Lin said Evergrande’s share price could fall to below HK$1 if the company is forced to sell most of its assets in a restructuring.
One of Evergrande’s main lenders has made provisions for losses on a portion of its loans to the embattled developer, while some creditors are planning to give it more time to repay, four bank executives told Reuters.
Policymakers are telling Evergrande’s major lenders to extend interest payments or rollover loans, and market watchers are large of the view that a direct bailout from the government is unlikely.
The People’s Bank of China, its central bank, and the nation’s banking watchdog summoned Evergrande’s executives in August in a rare move and warned that it needed to reduce its debt risks and prioritize stability.
Evergrande is due to pay $83.5 million interest on Sept. 23 for its March 2022 bond. It has another $47.5 million interest payment due on Sept. 29 for March 2024 notes. Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates.
In any default scenario, Evergrande will need to restructure the bonds but analysts expect a low recovery ratio for investors. Trading of the company’s bonds underscored just how dramatically investor expectations of its prospects have deteriorated this year.
Goldman Sachs said last week that because Evergrande has dollar bonds issued by both the parent company and a special purpose vehicle, recoveries in a potential restructuring could differ between the two sets of bonds, and any potential restructuring process may be prolonged.
Vix Long (Buy) Enter At: 26.63 T.P_1: 27.94 T.P_2: 29.29 T.P_3: 31.58 T.P_4: 35.01 S.L: 21.47
All information on this website is of a general nature. The information is not adapted to conditions that are specific to your person or entity. The information provided can not be considered as personal, professional or legal advice or investment advice to the user.
This website and all information is intended for educational purposes only and does not give financial advice. Signal Factory is not a service to provide legal and financial advice; any information provided here is only the personal opinion of the author (not advice or financial advice in any sense, and in the sense of any act, ordinance or law of any country) and must not be used for financial activities. Signal Factory does not offer, operate or provide financial, brokerage, commercial or investment services and is not a financial advisor. Rather, Signal Factory is an educational site and a platform for exchanging Forex information. Whenever information is disclosed, whether express or implied, about profit or revenue, it is not a guarantee. No method or trading system ensures that it will generate a profit, so always remember that trade can lead to a loss. Trading responsibility, whether resulting in profits or losses, is yours and you must agree not to hold Signal Factory or other information providers that are responsible in any way whatsoever. The use of the system means that the user accepts Disclaimer and Terms of Use.
Signal Factory is not represented as a registered investment consultant or brokerage dealer nor offers to buy or sell any of the financial instruments mentioned in the service offered.
While Signal Factory believes that the content provided is accurate, there are no explicit or implied warranties of accuracy. The information provided is believed to be reliable; Signal Factory does not guarantee the accuracy or completeness of the information provided. Third parties refer to Signal Factory to provide technology and information if a third party fails, and then there is a risk that the information may be delayed or not delivered at all.
All information and comments contained on this website, including but not limited to, opinions, analyzes, news, prices, research, and general, do not constitute investment advice or an invitation to buy or sell any type of instrument. Signal Factory assumes no responsibility for any loss or damage that may result, directly or indirectly, from the use or dependence on such information.
All information contained on this web site is a personal opinion or belief of the author. None of these data is a recommendation or financial advice in any sense, also within the meaning of any commercial act or law. Writers, publishers and affiliates of Signal Factory are not responsible for your trading in any way.
The information and opinions contained in the site are provided for information only and for educational reasons, should never be considered as direct or indirect advice to open a trading account and / or invest money in Forex trading with any Forex company . Signal Factory assumes no responsibility for any decisions taken by the user to create a merchant account with any of the brokers listed on this website. Anyone who decides to set up a merchant account or use the services, free of charge or paid, to any of the Forex companies mentioned on this website, bears full responsibility for their actions.
Any institution that offers a service and is listed on this website, including forex brokers, financial companies and other institutions, is present only for informational purposes. All ratings, ratings, banners, reviews, or other information found for any of the above-mentioned institutions are provided in a strictly objective manner and according to the best possible reflection of the materials on the official website of the company.
Forex trading is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against merchants. Before each Forex investment, you should carefully consider your goals, past experience and risk level. The opinions and data contained on this site should not be considered as suggestions or advice for the sale or purchase of currency or other instruments. Past results do not show or guarantee future results.
Neither Signal Factory nor its affiliates ensure the accuracy of the content provided on this Site. You explicitly agree that viewing, visiting or using this website is at your own risk.
