ECONOMY

FirstFT: Evergrande deadline sends chills through Asia’s debt market

Evergrande Real Estate Group updates

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Deepening worries over Evergrande have ignited selling in a $428bn corner of Asia’s debt market, underscoring how the crisis at the Chinese property developer is spreading to other assets as traders and investors braced for a crucial payment deadline yesterday.

As the deadline passed, the status of the payment remained unclear, CNN reported, and bondholders were left waiting for more information. Chinese authorities, however, have asked local governments to prepare for the possibility of Evergrande’s downfall, according to the Wall Street Journal.

The Evergrande bond on which the interest payment was due was trading at about $0.28 on the dollar, a signal of substantial distress, as traders fretted over the potential fallout if the company begins missing payments. A failure to make an interest payment could spark China’s biggest-ever debt restructuring.

It would also mark the most severe shock to date across a market to which international asset managers had been enticed by lucrative returns as global bond yields sat near historic lows.

Meanwhile, Xi Jinping, just a year away from an unprecedented third term in power, is taking one of the biggest economic gambles of his presidency by letting Evergrande teeter on the edge of bankruptcy. (FT, CNN, Reuters, WSJ)

Read more:

What do you think the impact would be if Evergrande defaults? Email me at [email protected] and let me know what you think. Thanks for reading FirstFT Asia. — Emily

Five more stories in the news

1. Goldman exec who led consumer banking launch to depart Harit Talwar, who spearheaded Goldman Sachs’ push into consumer banking is leaving the bank in October, 10 months after he handed over day-to-day running of the business. The departure crystallises a transition to a new phase of leadership at its consumer business.

3. Turkey cuts interest rate as inflation soars The central bank unexpectedly cut its benchmark interest rate on Thursday, despite accelerating inflation that had turned borrowing costs negative in real terms. The lira tumbled more than 1.5 per cent following the decision, hitting an all-time low of TL8.80 to the US dollar.

3. US envoy to Haiti resigns The US special envoy to Haiti has resigned in protest at what he described as the Biden administration’s “inhumane, counterproductive decision” to deport thousands of Haitian migrants.

4. China urges end to sanctions on Afghanistan Beijing has called for economic sanctions on Afghanistan to be lifted and the Taliban to be given access to billions of dollars in frozen foreign exchange reserves, highlighting a deepening rift between China and the west over the future of the country.

5. US and China climate pledges raise hopes ahead of COP26 A surprise announcement from President Xi Jinping that Beijing would end funding for international coal power plants, combined with a fresh pledge from President Joe Biden to double US climate aid, have injected a rare note of optimism into fraught climate negotiations, just five weeks ahead of the Glasgow summit.

Coronavirus digest

  • The Asian Development Bank has lowered its 2021 economic growth forecast for developing Asia amid concerns over the direction of the pandemic.

  • Novavax has applied for emergency use authorisation of its Covid-19 vaccine from the World Health Organization, approval from which would allow the vaccine to be used in the Covax programme.

  • The UK has issued a last-minute quarantine waiver for ministers from “red list” countries attending the upcoming UN climate summit.

  • The US Food and Drug Administration has approved a third shot of the BioNTech/Pfizer Covid-19 vaccine for vulnerable Americans.

  • Covid-19 cases among schoolchildren in England have surged to a record high, raising the spectre of further education disruption.

Chart showing that cases among school-age children in England have surged to a record high, and there are signs that this is feeding through to their parents’ age group

The days ahead

Japan economic data Consumer price index and manufacturing and services PMIs will be released today. Last month, the country’s services sector shrunk at the fastest pace in more than a year. (FT, Reuters)

UK Labour party conference The annual summit will begin in Brighton on Saturday. Labour leader Sir Keir Starmer is expected to focus heavily on the cost of living crisis. Ahead of the conference, Starmer was facing pressure to delay plans to rewrite Labour’s leadership election rules.

Germany’s election Ahead of polling day on Sunday — and the end of the Angela Merkel era — the country’s election is wide open. Rarely has such a crucial democratic exercise been tinged by so much uncertainty. Never before have Germans faced such a broad spectrum of possible electoral outcomes. Follow the latest with our poll tracker and our Europe Express newsletter.

Live updating charts of the latest voting intention polls for the German Bundestag elections.

What else we’re reading and listening to

Collapsed Blackstone deal shows ‘everything is political’ in China After the buyout group was forced to call off a $3bn deal to buy property developer Soho China, the private capital industry’s is reassessing how to place its bets on the world’s second-largest economy. The episode underlined that even the highly connected can struggle to navigate the country’s political environment.

Inside ESG A special 5-part podcast series goes live today analysing the colossal sums flowing into sustainable investing. Produced in partnership with the Moral Money team, the first part of the series asks, can it be true that ESG investing can address some of the world’s most-pressing problems, including climate change and inequality? You can listen to the second part here. Sign up to our Moral Money email here.

Biden’s tax plans quiz How much do you know about President Joe Biden’s tax proposals? Take the FT’s new quiz about the proposals making their way through Congress. First question: How has the top marginal federal income tax rate (%) changed over time, and what is it today? To answer click here.

Five takeaways from the latest Fed meeting The Federal Reserve’s meeting this week concluded with a clear message: monetary policy in the US is about to become a lot tighter. From debt ceiling woes to fears of contagion from the debt crisis at China’s Evergrande, FT’s Colby Smith breaks down the takeaways from this week’s meeting.

What we can learn from Afghanistan’s nascent crypto economy Reports suggest wealthy Afghans are using crypto to store wealth and move money overseas. The development should make us ponder the slippery topic of trust and “credit” in finance. Even if we live far from the country, and even if we love or hate bitcoin, writes Gillian Tett.

Fashion

FT’s Lauren Indvik gives a dispatch from London Fashion Week, during a trying moment for British fashion. She highlights energetic debuts from Steven Stokey-Daley and Harris Reed, and an appearance from mayor Sadiq Khan that enlivened a somewhat muted schedule.

Members of the National Youth Theatre modelled SS Daley’s debut solo show © Haydon Perrior for Thomas De Cruz Media (@haydonperrior for @thomasdecruzmedia)
Members of the National Youth Theatre modelled SS Daley’s debut solo show © Haydon Perrior for Thomas De Cruz Media (@haydonperrior for @thomasdecruzmedia)

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