Copyright BusinessAMBE

Evergrande, a Chinese real estate giant, has filed for bankruptcy in the United States. As a result, concerns about the Chinese real estate market are reigniting. Hang Seng index, the benchmark for the Hong Kong stock market, is in a bear market.

Evergrande has been in trouble for two years, but has now filed for creditor protection in the U.S. Stock markets in both China and the West are giving ground as a result.

In the news: Evergrande, the most indebted property developer on earth, on Thursday. In doing so, the real estate giant invoked Chapter 15 of the U.S. Bankruptcy Code, which protects foreign companies with assets in the U.S. undergoing restructuring from U.S. creditors.

  • Evergrande's announcement put pressure on stock markets. The Hang Seng Index closed the Chinese trading day 2.05 percent lower. That puts the index down 20 percent from its January high, meaning the Hong Kong stock market is in a bear market.
  • China's other indices also shared in the blows. The Shanghai Stock Exchange Composite Index lost 1 percent and Shanghai Shenzhen CSI 300 dropped 1.25 percent. Those two indexes are far from a bear market, though.
  • Concerns about China's real estate market are being felt as far away as us. At around 2:30 p.m., the Eurostoxx50 was down 1 percent and the Bel20 had to give up 1.3 percent. Stock markets in the U.S. are also heading for a red opening. Pre-exchange the Dow Jones dropped 0.5 percent and the Nasdaq 0.8 percent.
    • In the West, investors are also worried about rising interest rates. There is growing awareness that central banks, including the Fed and ECB, need to fight high inflation for a while longer.
  • Earlier this week, it also came to light that Country Garden two interest payments in August. "That combined with the problems at Evergrande is causing investors to start worrying about a domino effect and bankruptcy," Russ Mould, investment director at investment platform AJ Bell, noted to U.S. news site .
  • JPMorgan on Tuesday raised its forecast for defaults by companies with low credit scores in emerging markets, mainly because of rising contagion fears around China's real estate sector, which the U.S. bank says will account for nearly 40 percent of all defaults by 2023.

© The Content Exchange, source News