Global stock markets recover ground as crisis-hit Evergrande reveals bond settlement

Global stock market values are climbing after a massive Chinese company, seen as having the largest debt pile in the world, was able to sooth worries over its imminent future.

Investors have been rattled this week by the state of debts – seen as high as $310bn – at real estate-to-carmaker Evergrande.

As the clock ticked down to a deadline for interest payments to be made on bonds this week, stock markets plunged on fears that any default would expose China’s banks and other financial institutions to huge losses and destabilise the country’s financial system.

Banks including UK-based HSBC are also understood to be holders of its debt.

Some commentators had even described the situation as China’s Lehman moment – a comparison with the collapse of US investment bank Lehman Brothers which sparked the 2008 financial crisis.

But concerns over its immediate future eased on Monday when Evergrande’s parent firm said it had settled the interest payments that were due on Thursday and “resolved” the bond, which was sold to domestic investors and due to mature in 2025, following “private negotiations”.

The announcement did, however, fail to address all imminent concerns over its financial health as no information was divulged on the fate of another, larger, bond interest payment that is also due on Thursday to foreign investors.

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Those concerns were soothed, commentators said, by an injection of cash worth £10.3bn into the banking system by China’s central bank.

It coincided with the opening of China’s own markets for the first time this week following an autumn holiday – exposing them to the contagion fears around Evergrande after the chaos elsewhere.

The Shanghai Composite gained 0.4% by the close of trading while, in Europe, the FTSE 100 clawed back ground it had lost on Monday to be 1.2% up in late morning deals.

Its value was boosted by mining and financial stocks though gambling firm Entain led the way thanks to a takeover offer from an American suitor.

US futures suggested the Dow Jones Industrial Average and wider S&P 500 would open around 0.8% up.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “‘A series of temporary fixes to ominous global problems has pushed the FTSE 100 back over the… 7,000 mark but there’s a chance the nuts and bolts may weaken again, and the wheels could fall off the recovery.”

“The deal to settle a domestic bond payment due to be made by the crisis hit Chinese property group Evergrande, seems to have calmed nerves among investors and stopped immediate contagion to other sectors.

“Mining stocks, which were among the worst hit on Monday when fears mounted that a collapse of the firm was imminent, are among the top risers today.

“Worries about the immediate impact on demand for raw materials for construction have subsided but with another debt payment due to be made by Evergrande on an overseas bond tomorrow, the myriad problems facing the group are far from over,” she wrote.

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