NS Fear of default by Chinese real estate giant Evergrande And the potential impacts on the Chinese economy are affecting stock exchanges around the world and triggering a risk flight, with oil falling and the dollar rising against the real and other currencies, on Monday, 20.
Swissquote is warning of the risk of contagion to other real estate companies if Evergrande, which has more than $300 billion in debt and sees its shares plunge to an 11-year low, defaults. According to the institution, the company “should default on the payment.” (hypothetical) This week, analysts warned of the “potential to shake financial markets”.
Capital Economics says in a report sent to clients that the fallout from the “Evergrande affair” to the rest of the world is growing, but says the turmoil has not yet reached the level of previous “horror” in China, such as the trade war. with the US in 2018 and 2019 or the Asian country’s economic slowdown in 2015 and 2016.
At 3:22 p.m., Ibovespa, the main index of the Brazilian Stock Exchange, was at 107,724.29 points, down 3.33% compared to Friday’s close, at 111,439.37 points. At its lowest level during the day, the index reached 107.520.14 points. At the market opening, the index lost 109 thousand points – the level last seen in early March. The dollar in cash rose 1.40%, quoted at 5.3562 Brazilian reais, after reaching 5.3613 Brazilian reais.
In New York, at 2:26 pm, the Dow Jones was down 2.26%, while the S&P 500 and Nasdaq lost 2.27% and 2.70% in that order. In Europe, London closed down 0.79%, Frankfurt lost 2.31% and Paris 1.74%. Hong Kong stocks closed 3.3% lower as a result of Evergrande, while stock markets in China, Japan, South Korea and Taiwan were not open due to holidays.
At B3, the loss is practically generalized by stocks of goods. Vale ON is down more than 5%, reflecting an 8.80% drop in crude prices, which were set at $92.98 a tonne – below $100 for the first time in more than a year. CSN ON also fell by 6.38%.
Among the biggest losses in Ibovespa, PetroRio gave up 8.72%, ahead of Braskem (-6.95%) and Via (-7.09%). Losses among the major banks were 4.28% (Bradesco ON), while Petrobras ON and PN lost 2.90% and 3.73%, respectively, in the session.
“The market is cautious, preparing for the worst. If nothing happens, the better,” says economist Silvio Campos Neto, partner at Tendências Consultoria. According to him, the reaction of the markets is that investors feel that they may have some contagion either through the financial sector or through debt with foreigners, at a time when China is showing signs of slowing down, with a decline in commodities, affecting countries. Like Brazil.
Evergrande has already warned creditors that it will not be able to meet interest payments on debt maturing on Monday. “China’s credit market is closely linked to real estate, and the status of the largest domestic construction company could cause more fear, polluting other sectors such as finance,” Julia Aquino, investment specialist at Rico Investments, wrote in a note. In addition, China, the world’s largest importer of crude, continues to impose restrictions on the country’s steel production, he adds.
Despite the concerns, rating agency S&P Global Ratings says a default by Evergrande will not trigger a wave of bankruptcy or have minor repercussions, but will generate an intermediate situation.
Understand the Evergrande Crisis
In addition to being cautious on issues related to China, the market is also waiting for the monetary policy meeting in the United States, next Wednesday, 22. Amid the conflicting data in the country, investors have great doubt about an indication of the withdrawal of stimulus to the economy, the so-called tapering off.
“Music fanatic. Very humble explorer. Analyst. Travel fanatic. Extreme television teacher. Gamer.”