UPDATE 1 – China and Hong Kong Shares Rise After Evergrande Provides Funds for Interest Payment

(Price update)

SHANGHAI, Oct.22 (Reuters) – Shares of China and Hong Kong rose on Friday, led by real estate stocks, as China Evergrande Group unexpectedly provided funds for the bond interest payment, while Comments from the banking regulator also supported the real estate market.

Evergrande has provided funds to pay interest on a US dollar bond, a person with first-hand knowledge of the matter told Reuters on Friday, days ahead of a deadline that would have seen the developer plunge into formal default. Evergrande did not respond to requests for comment.

Energy and mining stocks, however, fell as coal futures extended losses after Beijing signaled it would intervene to calm the price spike that contributed to the shortage of electricity of the country.

China’s blue-chip CSI300 index closed 0.6% higher, while the Shanghai Composite Index erased earlier gains to end the session down 0.3%. Hong Kong’s Hang Seng Index rose 0.4%.

“In the short term, we believe that the interest repayment should give a boost to Chinese risk assets, including the yuan and Chinese equities,” said Wei Liang Chang, macro-strategist at DBS Bank, Singapore.

“Evergrande’s default risks, while not dissipated, have likely been postponed for some time.”

Sentiment in the sector, which had been severely affected by the Evergrande debt crisis, also recovered after China’s banking regulator on Thursday urged lenders to meet basic demand credit needs and support mortgages to first-time home buyers.

“We note that regulators have toned down to avoid excessive real estate tightening and are seeing marginal easing of mortgage measures,” Citi said in a research note, expecting the rate mortgage rates in some areas decline over time.

The average mortgage rate in major Chinese cities fell in October, the first monthly drop this year, Caixin reported on Friday, citing the Beike Research Institute.

China’s CSI300 real estate index rose 2.4%, after jumping to 6.5% earlier in the session. An index listing mainland developers listed in Hong Kong gained 3.3%, as Evergrande shares jumped 7.8%.

An index that tracks Chinese coal producers fell nearly 6%, while the CSI Energy index fell 5%. (Report by the Shanghai Newsroom; Editing by Ana Nicolaci da Costa and Vinay Dwivedi)

About Matthew Berkey

Check Also

Brazilian police: the remains of a British journalist have been found

RIO DE JANEIRO (AP) — Federal police said Friday that human remains found in the …

Leave a Reply

Your email address will not be published.