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Stocks Hit as Evergrande Risk Begins to Spread


MongiIG

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TALKING POINTS:

  • The week is starting with a risk off move as worries around Evergrande continue to spread.
  • The Fed has a rate decision on Wednesday which means that they’re in a blackout period now, preventing the possibility of Fed-speak to perk markets up until we hear the rate decision later this week.

Evergrande is the symptom, not the cause

 

Risk can happen fast, and that’s what’s pushing prices to start this week as from Evergrande has continued to spread. I had looked into the matter last week, noting that equity markets had seemingly ignored this risk, for the most part up to that point. While China, Japan, South Korea and Taiwan were all on holiday today, developments have continued to evolve around the ongoing situation with the insolvent property developer, Evergrande.

The domino effect started in Hong Kong markets on the weekly open with the Hang Seng taking a hit. That pain then began to spread globally, with stocks in Europe selling off and US issues were unable to escape the pain.

At this point, US equity futures are sitting on lows ahead of the 9:30 AM ET open and the Federal Reserve waits in the wings for what’s expected to be a highly-watched rate decision on Wednesday. The bank may have yet another reason to delay any possible plans to announce tapering, at this point, should the Evergrande situation continue to evolve.

S&P 500

The S&P 500 has traded down to a fresh monthly low, testing support around the August 19th swing low. I had noted last week that the S&P 500 could technically put in a 38.2% retracement, which would entail a total hit of -19.84%, with the bullish trend still remaining in workable order. If we round that 19.84% up to 20, well then technically the index would be in a bear market and still in a bullish trend.

At this point, we’re less than 5% off of the highs and the Fed is on the docket for Wednesday. It’s not all doom and gloom right now.

To learn more about the rising wedge pattern on the below chart, check out DailyFX Education

S&P 500 DAILY PRICE CHART

S&P 500 Daily Price Chart

Chart prepared by James Stanley; S&P 500 on Tradingview

NASDAQ 100: THE BIG LEVEL IS 15K

The Nasdaq is similarly pulling back and like the S&P 500 above, we remain less than 5% off of all-time-highs, as of this writing.

The big level to follow here is the 15k psychological level, which functioned as resistance on the way up but, to date, hasn’t shown much for higher-low support yet. A hold of support there can keep the door open for buy-the-dip scenarios ahead of the Fed.

NASDAQ 100 DAILY PRICE CHART

Nasdaq 100 Daily Price Chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

Written by James Stanley, Senior Strategist for DailyFX.com. 20 September 2021

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15 minutes ago, neonred said:

More exposure then many think... This will be a roller coaster on its way down unless a rescue plan is hatched last minute.  Doesn't look like that's gong to happen.  'Hold on to your hats' 

Hi @neonred

"(Evergrande's) stock will continue to fall, because there's not yet a solution that appears to be helping the company to ease its liquidity stress, and there are still so many uncertainties about what the company will do in case of a restructuring," Kington Lin, managing director of Asset Management Department at Canfield Securities Limited, said.

 

Regards,

MongiIG

  • Like 1
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China’s embattled developer Evergrande is on the brink of default. Here’s why it matters.

image.png

China Evergrande Shares Plummet to 11-Year Low on Default Risks - Asia  Financial News

Chinese property giant Evergrande is on the brink of collapse, and analysts warn the potential fallout could have far-reaching implications that spill outside China’s borders.

“Evergrande’s collapse would be the biggest test that China’s financial system has faced in years,” says Mark Williams, chief Asia economist at Capital Economics.

Here’s how bad its problems are, and what’s in store for investors: click the link for the full article on CNBC.

 

By Weizhen Tan, CNBC

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2 hours ago, MongiIG said:

Hi @neonred

"(Evergrande's) stock will continue to fall, because there's not yet a solution that appears to be helping the company to ease its liquidity stress, and there are still so many uncertainties about what the company will do in case of a restructuring," Kington Lin, managing director of Asset Management Department at Canfield Securities Limited, said.

 

Regards,

MongiIG

Hi, 

Trouble is it's a fall for all...See what happens when Nikkei cash session opens Dow heading for 800 pts lower

Some would say we  were due a correction but i'd say this is mostly due to Evergrande

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7 minutes ago, neonred said:

Hi, 

Trouble is it's a fall for all...See what happens when Nikkei cash session opens Dow heading for 800 pts lower

Some would say we  were due a correction but i'd say this is mostly due to Evergrande

People are comparing this to Lehman,  'I hope not'  We had a global crisis that loomed when Lehman went down

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14 hours ago, neonred said:

People are comparing this to Lehman,  'I hope not'  We had a global crisis that loomed when Lehman went down

Hi @neonred

China Evergrande Group’s debt crisis is unlikely to become China’s “Lehman moment,” according to strategists at Citigroup Inc., Barclays Plc and UBS Group AG.

Barclays argues the market environment isn’t similar to what happened during the collapse of Lehman Brothers, UBS says the default levels are pretty low versus the size of China’s economy and Citi expects the policy makers to step in.

 

Lets hope they don't default and collapse like Lehman Brothers.

 

All the best - MongiIG

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3 hours ago, neonred said:

Hi,

Any idea why Vivendi SA stock has plumeted to 2002 lows.  Would be interested to know whats happened there.  Was featured on Jerome Naylors morning call the other day? Can Ie mail him?  

Hi @neonred,

Universal Music Group was spun out of Vivendi and shares in UMG took value with them. Universal shares rose substantially. Anyone with a prior interest in Vivendi would own the new stock in UMG. That is of course if they owned the stock.
 
You can contact helpdesk.uk@ig.com and your message will be passed on to him.
 
All the best - MongiIG
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18 hours ago, MongiIG said:

Hi @neonred,

Universal Music Group was spun out of Vivendi and shares in UMG took value with them. Universal shares rose substantially. Anyone with a prior interest in Vivendi would own the new stock in UMG. That is of course if they owned the stock.
 
You can contact helpdesk.uk@ig.com and your message will be passed on to him.
 
All the best - MongiIG

Okay.. Many thanks for that and thanks for the explanation this morning.

 

Regards

 

ATB Luigi.

  • Thanks 1
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  • 2 months later...
On 20/09/2021 at 17:23, MongiIG said:

China’s embattled developer Evergrande is on the brink of default. Here’s why it matters.

image.png

China Evergrande Shares Plummet to 11-Year Low on Default Risks - Asia  Financial News

Chinese property giant Evergrande is on the brink of collapse, and analysts warn the potential fallout could have far-reaching implications that spill outside China’s borders.

“Evergrande’s collapse would be the biggest test that China’s financial system has faced in years,” says Mark Williams, chief Asia economist at Capital Economics.

Here’s how bad its problems are, and what’s in store for investors: click the link for the full article on CNBC.

 

By Weizhen Tan, CNBC

image.png

image.png

image.png

Evergrande is set to forge ahead into a debt restructuring that would include all of its offshore public bonds and private debt, according to analysts.

The troubled real estate developer, swamped by $300 billion of liabilities, also said Tuesday that it’s setting up a risk management committee, which will play a role in mitigating and eliminating future risks for the firm. The world’s most indebted property developer has been struggling to raise funds to pay suppliers and investors.

Full article: CNBC

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