Markets and commodities slumped heavily on Monday responding to reports that Evergrande, the world’s most indebted property firm has more than $300bn of liabilities, and although it settled payment on a domestic bond it missed an $83.5 million dollar interest payment on Thursday setting the clock ticking on the 30-day grace period.
Some are calling it China’s Lehmann moment but that appears to be overstating it, and although early trading on Monday saw an almost 3% by Friday markets had shrugged it off with the S&P closing the week over 1% up on the week.
Technically, the S&P has been threatening to rollover, but the bounce from Monday lows suggests it may not be game over, yet, although the upward momentum will need continue into next week, and ultimately need to clear 4550.
The Evergrande story certainly isn’t over. The systemic risk is real, and should Evergrande collapse it would pose a significant threat to China’s financial system though and would surely reverberate around world markets.
For a more thorough explanation of the Evergrande story Patrick Boyle has some great content on his YouTube channel.