China Evergrande Group crisis sends US stocks tumbling

Us stocks fell sharply on Monday, with the S&P 500 falling 1.7 per cent and the tech-heavy Nasdaq composite index falling 2.2 per cent, its biggest one-day percentage decline since May, amid global market jitters sparked by China’s Evergrande Crisis.

Separately, the Dow Jones Industrial Average closed down 614.41 points, or 1.78 percent, its biggest one-day drop since July 19, as investors fled the stock market in search of safety amid fears of a possible bankruptcy of China Evergrande, Reuters said.
Before the opening of the US stock market, the few Asian stocks opened in Hong Kong on the 20th, the intraday drop 1000 points, the Hang Seng Index once fell more than 4%, Evergrande Real Estate fell nearly 30% last week, the 20th continued to drop more than 10% to HK $2.28 per share.
“You kind of know that when something happens that catches the market off guard, it can lead to a big sell-off, but you don’t know why,” Sameer Samana, senior global market strategist at Wells Fargo Investment Research, told Reuters. “I guess it’s because of the China news, but… it’s not entirely surprising given how bullish people were,” he added.
China Evergrande has the largest debt burden of any publicly traded property manager or developer in the world, the Wall Street Journal noted, raising concerns about a shift away from riskier assets such as stocks, oil and bitcoin into safer assets.
“Market participants are increasingly concerned that The Chinese government will continue to clamp down on some industries and allow Evergrande, which owes tens of billions of dollars to global investors, to fail and inflict losses on its shareholders and bondholders,” the report said.
Some analysts, however, did not expect Evergrande’s financial woes to spill over to other financial markets around the world, and said Tuesday’s drop should be short-lived.
Achim la societe generale Asia equity strategy at class (Frank Benzimra) told the media, said Evergrande group is unlikely to repeat similar to the 2008 financial crisis, “lehman moment”, he said: “when to leverage, China Evergrande and Internet industry regulatory concern together, will cause a huge market volatility”.
After years of debt-fuelled expansion in China’s property sector, Beijing’s top brass pressed Evergrande and other developers to reduce their debt loads. Evergrande’s ability to survive the debt crisis remains uncertain, but many investors are already worried that China’s housing market could collapse, implicating other industries and even foreign financial institutions, further undermining confidence as U.S. stocks recover from record highs.
France-Presse recently reported that Evergrande’s debt burden is as high as $300 billion, and the threat of bankruptcy is real. Evergrande said in a statement to the Hong Kong stock Exchange on September 14 that it had hired financial advisers to explore all possible solutions to alleviate its cash shortage. The statement warned that there was no guarantee evergrande would be able to meet its financial obligations.