Asia shares gain as Evergrande jumps 22%; STI up 0.7%

HONG KONG (BLOOMBERTG, REUTERS) – Asian stocks mostly rose on Thursday (Sept 23) as some fears over embattled China Evergrande Group eased and Wall Street weathered the prospect of a reduction in Federal Reserve stimulus as early as November.

Stocks in China and Hong Kong rallied, including a surge in the shares of indebted developer Evergrande.

Evergrande’s shares surged 23 per cent after a unit said on Wednesday, when the Hong Kong market was closed for a holiday, that it had “resolved” a coupon payment on an onshore bond.

The Hong Kong benchmark rose 1.6 per cent, boosting MSCI’s broadest index of Asia-Pacific shares outside Japan, which gained 0.64 per cent

Elsewhere, Chinese blue chips gained 0.74 per cent, Australia’s benchmark rose 1.04 per cent, and South Korea’s Kospi fell 0.6 per cent after returning from a three-day break to catch up with global falls earlier in the week. Japan was closed for a holiday.

Singapore’s Straits Times Index was up 0.71 per cent at 10.15am local time.

US stock futures, the S&P 500 e-minis, were up 0.31 per cent.

Traders are continuing to monitor the debt crisis at Evergrande. The focus now has shifted to US$83.5 million (S$113 million) in US dollar-bond interest payments due Thusrday.

“I am not so concerned about the contagion to developed markets or even to the rest of the emerging markets, but this is far from resolved,” Joyce Chang, JPMorgan Global Research chair, said on Bloomberg Television, referring to the Evergrande situation. “I do think that the government will do something that is more state-guided in this case.”

Overnight, Fed chair Jerome Powell said the US central bank could begin scaling back asset purchases in November and complete the process by mid-2022. Officials also revealed a growing inclination to raise interest rates next year. The Treasury yield curve flattened and the dollar rose. Cash Treasuries won’t trade in Asia because of the Japan holiday.

Mr Powell said he didn’t expect the Fed to begin rate increases until after completing a taper process that would wrap up around the middle of 2022. The gradual shift away from ultra-loose policy, along with fears of contagion emanating from Evergrande, have shaped a volatile week for markets amid worries about a slowing recovery from the pandemic.

“The Fed has got to pleased that their communication on the longer way to tapering has avoided the dreaded fear of the tantrum,” Jeffrey Rosenberg, senior portfolio manager for systematic fixed income at BlackRock, said on Bloomberg Television. “The flatter curve is kind of an initial response. Yes the curve is flatter, but you’ve got to squint to see that market reaction. This is a very good outcome for the Fed in terms of signaling their intent to give the market information well ahead of the tapering decision.”

Fears that Evergrande could fail to meet its obligations jolted global markets early this week as traders worried the giant developer’s issues could spill over to other property firms and banks. Concerns eased somewhat on Wednesday when the People’s Bank of China injected 90 billion yuan (US$13.9 billion) into the banking system.

The three major US stock indexes closed up 1 per cent on Wednesday, not far off where they were before the Fed announcement, and US Treasury yields see-sawed, before largely taking the change in their stride.

The US dollar rose after the Fed chair’s remarks hitting a month-high of 93.526 against a basket of currencies particularly gaining against the euro and yen , but paused for breath in Asian hours

US crude dipped 0.11 per cent to US$72.15 a barrel. Brent crude fell 0.35 per cent US$76.13 per barrel.

Spot gold lost 0.24 per cent to trade at US$1,763.43 per ounce