(Bloomberg) — Chinese authorities are striving to signal to traders that whatever happens to China Evergrande Group, its debt crisis won’t spiral out of control or derail the economy.
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Just this week, the People’s Bank of China pledged to ensure a “healthy property market” and protect homebuyers. The central bank also added a net 100 billion yuan ($15.5 billion) of liquidity into the banking system on Tuesday — the eighth day of injections and the longest streak since December — while a local media commentary said China can expand fiscal policy if needed to spur growth.
Evergrande shares rose as much as 8.2% Tuesday. Those of smaller developer Sunac China Holdings Ltd. surged by a record after denying it had requested local government help, while its dollar bonds jumped.
Some emerging market funds, including those at BlackRock Inc. and BlueBay Asset Management LLP, started buying the developer’s dollar bonds at distressed levels, Morningstar Inc. said in a report.
Click here to read the most important takeaways from a live blog event “China Evergrande Debt Challenge Q&A” earlier on Tuesday.
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Lagarde Says Direct Euro-Area Exposure to Evergrande Is Limited
Hong Kong Asks Banks to Report Evergrande Exposure (1:24 p.m. HK)
Hong Kong’s central bank asked lenders to report their exposure to Evergrande on concern over potential systemic risks to the region’s financial system, according to people familiar with the matter.
The Hong Kong Monetary Authority queried lenders in the city last week, giving them 24 hours to respond on their financial commitments to China’s most indebted developer, both in terms of lending and derivatives, one of the people said, asking not to be named because of confidentiality.
China Offers More Short-Term Funding (9:20 a.m. HK)
China’s central bank continued to pump liquidity into the financial system on Tuesday as policy makers sought to avoid contagion stemming from Evergrande spreading to domestic markets. The overnight repo rate remains below 2%, indicating there’s no liquidity stress onshore. Lenders typically need more funding at the end of a quarter, and China’s upcoming weeklong holiday may also be a factor. The central bank’s Tuesday injections takes the eight-day total net funding to 710 billion yuan.
Sunac Says It Hasn’t Sought Government Assistance (8:37 a.m. HK)
Sunac China’s dollar bonds rebounded Tuesday after the company said it didn’t submit a request to a local government for policy support. The developer’s 6.5% 2026 note climbed 3.7 cents on the dollar to 84.9 cents, after plunging 8.6 cents in the previous two days. In a letter from a subsidiary seen by Bloomberg, Sunac China said the property market was almost frozen and that the company faced “huge pressure.” Sunac’s shares jumped as much as 19%.
Where International Bond-Fund Managers Stand (4:42 p.m. NY)
Analysts at Morningstar Inc. including Shannon Kirwin released a report outlining where a number of major international bond-fund managers stand with regard to Evergrande debt and the possible fallout from the company’s situation.
Emerging-markets teams at Pimco, Barings and T. Rowe Price Group Inc. have avoided or been significantly underweight Evergrande debt in their portfolios since at least mid-2020, when the Chinese government announced stricter debt limits for highly leveraged companies, Morningstar said in the report. Other managers were initially more optimistic, but have since tempered their optimism and exited positions, according to the study.
BlackRock’s emerging-markets team led by Sergio Trigo Paz, meanwhile, added Evergrande bonds after they reached distressed levels in mid-September. The logic, according to Morningstar: Because there are “considerable” chances for a debt restructuring or takeover by a state-owned company, the recovery value of the bonds is likely to exceed their current price of roughly 30 cents on the dollar.
PBOC Vows ‘Healthy’ Property Market (7:14 a.m. NY)
The People’s Bank of China will work to safeguard the healthy development of the real-estate market and protect home buyers’ lawful rights, the bank’s monetary policy committee said at its quarterly meeting Friday, according to a statement released Monday.
The central bank will step up efforts to coordinate monetary, fiscal, industrial policies and regulations to support the economy with finance and prevent risks. It also pledged to drive real lending rates lower.
Here are Evergrande dollar bond interest deadlines for this month and next:
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