21 Sep 2021

World shares sink as China Evergrande contagion fears spread

11:08 am on 21 September 2021

World stocks sold off sharply on Monday while safe-haven assets gained as troubles at property group China Evergrande fed concerns about spillover risks to the economy, creating fresh investor worries ahead of a busy week of central bank meetings.

The China Evergrande Centre in Hong Kong, 15 September 2021. World stocks sank on Monday as trading floors were gripped by contagion fears from the expected collapse of debt-plagued property giant Evergrande.

The China Evergrande Centre in Hong Kong. World stocks sank on Monday as traders feared the effects of an expected collapse of property giant Evergrande. Photo: AFP

MSCI's gauge of stocks across the globe shed 1.63 percent, its biggest one-day percentage fall day in about two months, as Wall Street's benchmark S&P 500 sagged 1.7 percent and the tech-heavy Nasdaq tumbled 2.2 percent.

Investors moved into safe havens, with US Treasuries gaining in price, pulling down yields, and gold rising.

Shares in Evergrande, which has been scrambling to raise funds to pay its many lenders, suppliers and investors, closed down 10.2 percent at $HK2.28.

Regulators have warned that its $305 billion of liabilities could spark broader risks to China's financial system if its debts are not stabilised.

On Wall Street, the Dow Jones Industrial Average fell 614.41 points (1.78 percent) to 33,970.47, the S&P 500 lost 75.26 points (1.70 percent) to 4,357.73 and the Nasdaq Composite dropped 330.07 points (2.19 percent) to 14,713.90.

Economically sensitive sectors, including financials and energy, were hit particularly hard. Still, stocks pared losses late with US indexes ending above their session lows.

The pan-European STOXX 600 index lost 1.67 percent, with mining stocks sliding.

The selloff on Monday has seen a cumulative $2.2 trillion of value wiped off the market capitalization of world equities from a record high of $97 trillion hit on Sept. 6, according to Refinitiv data.

Worries over Evergrande come as a rally in equities has stalled recently with investors focused on the impact of coronavirus cases on the economy, and when central banks will ease back on monetary stimulus.

The US Federal Reserve is due to meet on Tuesday and Wednesday as investors look for when it will begin pulling back on its bond purchases.

Investors were also keeping an eye on other central bank meetings spanning Brazil, Britain, Hungary, Indonesia, Japan, Norway, the Philippines, South Africa, Sweden, Switzerland, Taiwan and Turkey.

- Reuters