HONG KONG (BLOOMBERG, AFP, REUTERS) - Asian markets rose with Chinese property stocks rallying on Thursday (Sept 23) amid debt repayment hopes for China Evergrande Group, after Wall Street overnight weathered the prospect of a reduction in Federal Reserve stimulus as early as next month.
China’s central bank, meanwhile on Thursday net-injected into the financial system the most short-term liquidity in eight months, stoking bets that Beijing hopes to soothe market nerves over Evergrande.
The People’s Bank of China (PBOC) pumped in 110 billion yuan (S$23 billion) of cash with seven- and 14-day reverse repurchase agreements. That was the largest addition through open-market operations since late January, when a funding squeeze sent interbank rates soaring.
Prior to Thursday, the PBOC had injected liquidity for three straight sessions.
Hong Kong led advances as it reopened after a midweek break to catch up with Wednesday’s news that Evergrande had agreed on a plan to repay interest to its domestic bondholders, soothing worries of a default that have raised talk of a hammer blow to the Chinese economy.
While Wednesday’s statement was vaguely worded - not detailing how much and when it would pay - it was grasped as a much-needed positive sign.
The focus now is on whether the developer can pay US$83.5 million (S$113 million) of interest due on Thursday on a five-year US dollar bond.
Observers pointed out that even if it fails to meet its obligations, the firm still has 30 days to come up with the cash. However, they will be keeping an eye on how it deals with those dollar-denominated notes.
“International investors will watch closely for new developments and for any state reaction, and assess how contagious it can be for the rest of the economy,” said Mr Bernard Shaw, an Asia bond syndicate banker at Daiwa Capital Markets Singapore.
Hong Kong's Hang Seng Index rose more than 2 per cent in initial exchanges before easing slightly for a gain of 0.74 per cent.
Country Garden Services Holdings and Longfor Group Holdings each jumped more than 11 per cent to be the top gainers on the Hang Seng Properties Index.
Evergrande’s shares surged as much as 32 per cent before paring the advance to 18 per cent as at 2.17pm in Hong Kong.
Holidays this week across much of Asia have contributed to volatility. Mainland China’s equities markets were closed on Monday and Tuesday while Hong Kong was closed on Wednesday.
Chinese blue chips were up 0.15 per cent, Australia’s benchmark rose 1.18 per cent and South Korea’s Kospi fell 0.5 per cent after returning from a three-day break to catch up with global falls earlier in the week.
Singapore’s Straits Times Index was up 1.28 per cent at 2.29pm.
US stock futures, the S&P 500 e-minis, were up 0.26 per cent.
China high-yield dollar bonds, dominated by the property sector, also climbed three cents on the dollar on Thursday morning, according to credit traders.
Overnight, Fed chair Jerome Powell said the US central bank could begin scaling back asset purchases next month and complete the process by the middle of next year. Officials also revealed a growing inclination to raise interest rates next year.
Mr Powell said he did not expect the Fed to begin rate increases until after completing a taper process that would wrap up around the middle of next year.
He downplayed the global impact of the Evergrande saga and said it was more relevant to the Chinese economy.
"The most striking part of what we learnt from the Fed was that the market was very accepting of it," said Mr Kerry Craig, global market strategist at JP Morgan Asset Management.
The three major US stock indexes closed up 1 per cent, not far off where they were before the Fed announcement, and US Treasury yields were little changed at 1.3023 per cent after see-sawing overnight.
The US dollar rose after the Fed chair's remarks to hit a month-high of 93.526 against a basket of currencies, particularly gaining against the euro and yen, but paused for breath in Asian hours.
US crude rose 0.1 per cent to US$72.33 a barrel, while Brent crude gained 0.2 per cent to US$76.23 per barrel.
Spot gold lost 0.3 per cent to trade at US$1,763.32 per ounce.