Warburg Realty broker Jason Haber discusses the repercussions of Evergrande’s debt pile-up.
Evergrande, the massive Chinese real estate developer that rattled the US market on Monday after reports that it is struggling to avoid defaulting on $89 billion in debt, is unlikely to benefit from a Beijing bailout, according to a report.
S&P Global Ratings, the credit rating agency, said in a report on Monday that Beijing “would only be compelled to step in if there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy,” according to Bloomberg. “Evergrande failing alone would unlikely result in such a scenario.”
The US stock market fell 614 points, or 1.78% on Monday along with the S&P 500 index and the Nasdaq Composite declining 1.7% and 2.19%, respectively. The Dow was down almost 972 points at its worst levels of the day.
“I suspect the Chinese government is on top of this, and I don’t doubt they will deal with it severely, but I don’t think it will have the global effects the market is suggesting this morning,” said Carlyle Group co-founder David Rubenstein during an appearance Monday on “Mornings With Maria.”
YELLEN WARNS AGAIN AS DEBT CEILING LOOMS
Jen Psaki, the White House press secretary, pointed out that the company’s work is “overwhelmingly centered in China.” But she said the Biden administration is monitoring the global markets, including any risk to the U.S. economy. She assured Americans that the administration is “prepared to respond appropriately if needed.”
A Reuters report said many U.S. investors do not believe that the company will drag down the global economy, similar to the collapse of Lehman Brothers in 2008. The Financial Times called Evergrande the world’s most indebted property company.
“Investors . . . are rightfully asking where Beijing’s pain threshold falls, in terms of the slowdown in economic growth that would cause authorities to reverse course and ease controls toward the property industry,” Logan Wright, a Hong Kong-based director at the Rhodium Group, told the paper. “That turning point in policy is still far away,” he added. “Beijing is more likely to wait for signs of financial stress to materialize, rather than acting pre-emptively.”
Evergrande did not immediately respond to a Fox News inquiry.
Crossmark Chief Investment Officer Bob Doll discusses the market selloff taking place, the deepening crisis for China’s Evergrande and Treasury Secretary Yellen’s warning to Congress about the debt ceiling.
Evergrande ran into a cash crunch after its borrowing to build apartments, office towers and shopping malls collided with pressure from the ruling Communist Party to reduce corporate debt loads that are seen as a threat to the economy.
Andrew Left, the founder of Citron Research who said in 2012 that Evergrande was insolvent, told Reuters that he does not “think that this is going to be the straw that breaks the global economy’s back.”
The Associated Press contributed to this report
