Markets in Asia fluctuated on Friday following a record-breaking lead from Wall Street, while a report that troubled developer China Evergrande had paid interest on an overdue bond a day before the deadline eased concerns over a default.
Another round of positive earnings provided a further lift to Wall Street, with the S&P 500 hitting its first all-time high since the start of September as traders grow optimistic that companies are weathering a range of issues including surging inflation, supply chain snarls and slowing economic growth. Surging prices around the world and central banks’ moves to end their financial largesse have acted as a major drag on markets for months owing to the prospect that the era of cheap cash is coming to an end.
“The bout of investor nervousness has proven transitory, even as inflationary signals persist,” said Geir Lode, at investment manager Federated Hermes. “Equity markets are back on the rise as investors shrug off their recent concerns, with major indices near all-time highs. Earnings season is now under way in the US and while it is early days, the initial flurry of earnings have been well received. The supply squeeze, combined with increased demand, is particularly challenging, but blue-chip companies that can prove their ability to maintain profitability in an inflationary environment are likely to be well rewarded.”
With South Korea, Singapore and New Zealand among the countries already lifting interest rates – and the Bank of England expected to act soon – all eyes are on the Federal Reserve, which has indicated it will begin winding back its bond-buying programme by the year’s end. Observers widely expect it to announce a move next month, but the key question is when it will lift borrowing costs. Some have estimated as soon as mid-2022.
With South Korea, Singapore and New Zealand among the countries already lifting interest rates – and the Bank of England expected to act soon – all eyes are on the Federal Reserve, which has indicated it will begin winding back its bond-buying programme by the year’s end
Bitcoin dips
After a blockbuster start to the week, the Asian rally has petered out in the past two days. Tokyo, Hong Kong, Sydney, Singapore, Mumbai and Jakarta rose but there were losses in Shanghai, Seoul, Wellington, Taipei and Manila.
The mood in Hong Kong was lifted by a report that Evergrande had made a key offshore interest payment – just before Saturday’s deadline – on an offshore bond. Fears that the property giant could collapse and send shock waves through the Chinese economy have rattled buyers and markets, and shares plunged as the group resumed trading Thursday after a two-week halt. But on Friday, the state-backed Securities Times said the firm had wired an $83.5 million (€71.7m) payment first due on September 23, citing “relevant channels”. Saturday was the last day of a 30-day grace period.
However, the company has several other payments to make before the end of the year and traders will be closely watching to see if it can meet those, too. “They may be able to pay this interest, and maybe they can pay another interest – basically they have an interest payment every two weeks or so – but at some point... there’s going to be an amount of principal maturing, and that one’s multibillion,” Chen Long, partner at research firm Plenum, told AFP. “If you look at the fundamentals of the company, that hasn’t changed.”
Shares in the firm rose more than four per cent in Hong Kong, though that came a day after a drop of more than 12 per cent sparked by its announcement that the planned sale of its property services unit had fallen through. It had also warned that it could not guarantee meeting its debt obligations, reigniting fears of contagion in the vast property sector and wider Chinese economy.
Bitcoin fell as profit-takers moved in after the digital currency hit a new record of $66,976 on Thursday. It was sitting around $63,200 in afternoon Asian trade.