Heavily indebted Chinese real estate group Evergrande has promised to pay millions in interest on time, betting it will calm financial markets. In a statement to the Shenzhen Stock Exchange on Wednesday, the company said it had agreed on a plan to pay interest on a domestic bond that matures in 2025. The payments are worth 232 million yuan (30.5 million euros), according to Bloomberg news agency.
The interest payment, promised for Thursday, could prevent Evergrande's imminent bankruptcy for the time being. However, the company did not comment on other debts due on the same day. Overall, the company is groaning under a mountain of debt equivalent to 260 billion euros, which has sent financial markets into turmoil. A bankruptcy of the major corporation could have fatal economic consequences. It is still questionable how the Chinese government will react to the imbalance.
Despite the plan presented, the Asian markets remained unconvinced of the company's future. The 225-stock Nikkei index was 0.8 percent lower in the course at 29,608 points. The broader Topix index was down 0.6 percent at 2052 points. The Shanghai stock exchange was unchanged. The index of major companies in Shanghai and Shenzen treaded water. In Asian currency trading, the dollar gained 0.1 percent to 109.36 yen and was flat at 6.4655 yuan. Against the Swiss currency, it traded 0.1 percent higher at 0.9240 francs. In parallel, the euro was almost unchanged at 1.1725 dollars, gaining 0.1 percent to 1.0834 francs. The pound sterling gained 0.1 percent to 1.3670 dollars.
Uncertainty also prevailed among investors in anticipation that the U.S. Federal Reserve could take a step closer to curbing bond purchases, also known as "tapering." Most analysts, however, do not expect the Fed to go into detail. "Even if a tapering announcement is not expected, the Federal Open Market Committee's interest rate forecasts could provide a positive surprise and force Fed Chairman Jerome Powell to backtrack in the press conference," said Tapas Strickland, director of economics and markets at National Australia Bank.
Image by Gerd Altmann