Sept 7 (Reuters) – The bonds of Chinese property conglomerate Evergrande slumped on Tuesday after another downgrade, this time from Moody’s, while a broad index of emerging market shares struggled to keep hold of gains made after upbeat China export data.
The indebted Evergrande’s Shenzen-traded May 2023 bond plunged more than 20% as Moody’s warned that the risks of a default by the firm were rising and that, if it happened, investors would struggle to recover their money. Evergrande has over 240 billion yuan ($37.17 billion) of bills and trade payables from contractors to settle over the next 12 months, of which roughly 100 billion yuan is due within 2021, according to S&P Global. Its total debt is around 570 billion yuan JPMorgan estimates. The Hong Kong-listed shares of the company were also down 8% hitting their lowest since 2015 and taking their losses since last July to more than 85%.
It was not all gloomy in China though. Mainland shares climbed more than 1%, with the Shanghai Composite hitting its highest since February after export figures grew at a faster-than-expected pace in August. Hong Kong tech shares rose 1.6% too and the yuan strenghtened against the dollar.
“Trade strength may reduce the urgency to inject further stimulus, though we still expect targeted measures,” said Mitul Kotecha, chief EM Asia and Europe strategist at TD Securities.
“We also expect the (central bank) to continue to limit (yuan) appreciation versus the dollar while capping trade weighted strength in the currency via weaker fixings and currency intervention.”
Meanwhile, billionaire investor George Soros said BlackRock Inc’s investments into China now is a “tragic mistake” and is likely to lose money for the asset manager’s clients.
MSCI’s index of EM shares rose as much as 0.2% before wiping gains as some other Asian shares as well as those in Turkey and South Africa lost ground.
The day’s other big excitement was in El Salvador which was becoming the first country in the world to adopt bitcoin as legal tender. President Nayib Bukele said the country holds 400 bitcoins. He expects the move to be beneficial for the country and for remittances, but polls show Salvadorans remain somewhat sceptical considering its volatility.
In Europe, Polish stocks retreated from all-time highs hit last session. The European Union had warned on Monday that a number of Polish regions could lose funding due to declarations that they are “LGBT-free”.
In Africa, the rand fell 0.4%, retreating from near two-month highs ahead of GDP data due at 0930 GMT. The South African currency has gained about 8% from last month’s lows.
Nigeria’s naira was still weak too after it had hit a record low of 532 to the dollar in the black market. Central bank actions aimed at drawing business into the official exchange channels has hampered the currency since July.
For GRAPHIC on emerging market FX performance in 2021, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see tmsnrt.rs/2OusNdX
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