23 Sep 2021, 09:35

Hong Kong leads Asian markets rally as Evergrande fears subside

  HONG KONG, Sept 23, 2021 (BSS/AFP) - Asian markets rose Thursday as
concerns about the collapse of troubled property giant Evergrande receded for
now, while investors were also cheered by a Federal Reserve plan to begin
scaling back its ultra-loose monetary policy soon.

   Hong Kong led advances as it reopened after a midweek break to catch up
with news that Evergrande had agreed a plan to repay interest to its domestic
bondholders, soothing worries of a default that have raised talk of a hammer
blow to the Chinese economy.

   And while Wednesday's statement was vaguely worded -- not detailing how
much and when it would pay -- it was grasped as a much-needed positive sign.
Attention is now on what it plans to do about repayments to offshore
bondholders, which are due Thursday.

   Observers pointed out that even if it fails to meet its obligations, the
firm still has 30 days to come up with the cash. However, they will be
keeping an eye on how it deals with those dollar-denominated notes.

   "International investors will watch closely for new developments and for
any state reaction, and assess how contagious it can be for the rest of the
economy," Bernard Shaw, an Asia bond syndicate banker at Daiwa Capital
Markets Singapore, said.

   Hong Kong rose more than two percent in initial exchanges before easing
back slightly, with Evergrande surging about 30 percent briefly -- though its
shares are still down more than 80 percent this year. There were also gains
for other property developers as well as banks that have exposure to the

   Sydney and Manila were also more than one percent up, while Shanghai,
Singapore, Wellington, Taipei and Jakarta enjoyed healthy advances.

   The positive start to the day followed a rally of around one percent for
all three main Wall Street indexes, where investors also welcomed a Fed
statement on tapering its vast bond-buying programme.

   The central bank said it expects to "soon" be ready to start the wind-down
of stimulus put in place at the start of the pandemic and which has been a
key driver of the global economic and equity rebound.

   - Debt ceiling warning -

   The world's biggest economy was now strong enough to slow its bond-buying
programme "if progress continues broadly as expected", it said in a statement
after its policy meeting. "The Fed has officially given notice that if the
recovery continues as planned, a moderation in the pace of asset purchases
can happen soon," said OANDA's Edward Moya, adding that investors "can now
completely price in a formal November taper announcement with a December
start date".

   He said traders were cheered as "the Fed has well telegraphed that they
were nearing a taper announcement and continue to show they are in no rush to
deliver interest rate hikes".

   "The biggest risk to the stock market is an accelerated pace of tightening
and the Fed is showing that is something they will avoid unless they were
dead wrong about inflation."

   However, bank boss Jerome Powell warned US lawmakers to lift the country's
debt ceiling so as to avoid the government running out of cash and failing to
service its debt obligations, which could lead to a default and spark a
financial crisis.

   "It's just very important that the debt ceiling be raised in a timely
fashion so the United States can pay its bills when it comes due," he said.
Not paying is "just not something we can contemplate".

   His comments were backed by a group of former finance ministers -- who
served under presidents Jimmy Carter, George W. Bush, Bill Clinton and Barack
Obama -- who told leaders of both parties that even a short-lived default
could threaten growth.

   "It creates the risk of roiling markets, and of sapping economic
confidence, and it would prevent Americans from receiving vital services,"
they warned.

   On oil markets, both main contracts built on a two-day rally after data
showed US stockpiles at their lowest since 2018, lifting demand optimism,
even as the Delta Covid variant continues to course through populations,
sending infections spiking.

   - Key figures around 0300 GMT -

   Hong Kong - Hang Seng Index: UP 1.6 percent at 24,604.73

   Shanghai - Composite: UP 0.6 percent at 3,649.36

   Tokyo - Nikkei 225: Closed for a holiday

   Dollar/yen: UP at 109.90 yen from 109.80 yen at 2100 GMT

   Pound/dollar: UP at $1.3626 from $1.3620

   Euro/dollar: UP at $1.1698 from $1.1696

   Euro/pound: UP at 85.86 pence from 85.84 pence

   West Texas Intermediate: UP 0.1 percent at $72.33 per barrel

   Brent North Sea crude: UP 0.2 percent at $76.34 per barrel

   New York - Dow: UP 1.0 percent at 34,258.32 (close)

   London - FTSE 100: UP 1.5 percent at 7,083.37 (close).



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