From the Wall Street Journal’s “Stock Market Futures Fall on Chinese Property Fears” posted early Monday:
U.S. stock futures fell, pointing to an extension of recent losses on Wall Street as concerns regarding China’s indebted property sector rippled into global markets…
The broad retreat came amid concerns over property developer China Evergrande Group. Market participants increasingly believe that Beijing will let Evergrande fail and inflict losses on its shareholders and bondholders. The company’s debt burden is the biggest for any publicly traded real estate management or development company in the world.
Hong Kong-listed shares of Evergrande, which said Sept. 13 it was facing unprecedented difficulties, tumbled more than 10% to their lowest closing level in a decade. The Hang Seng Index dropped 3.3% to its lowest close since October. Mainland Chinese markets were closed for a holiday.
Property firms including Henderson Land Development, New World Development and Sun Hung Kai Properties also retreated more than 10%. Technology stocks pulled back, as did shares of financial firms such as China Merchants Bank and Ping An Insurance Group.
“Everyone is looking at Evergrande and saying ‘has the time come for a major default in that area, and then the potential for contagion into the broader property sector?’” said Edward Park, chief investment officer at Brooks Macdonald. “It’s an imminent risk now rather than being a theoretical risk as it has been for the past few years.”
My take: When the Chinese cleaver stops falling, we may have a buying opportunity.