Potential Default Evergrande Rp 4,000 T, Hang Seng Falls!

Jakarta, CNBC Indonesia – The benchmark stock price index of the Hong Kong stock exchange (Hang Seng Index) fell badly in today’s trading, Monday (20/9/2021), as it was hit by negative sentiment about Evergrande, a Chinese property giant that is in danger of going bankrupt.

At 11.00 WIB, the Hang Seng index fell more than 1,000 points, equivalent to a decline of 4.3%. Concerns about the health of the property market in China made it happen panic selling various stocks in Asia’s main exchanges, ranging from property, banks to insurance.

The Hang Seng Property Index plunged 5.9% while Ping An Insurance, the largest insurer by market capitalization, slumped 7.3% in Hong Kong.

Trading data at 12:53 am Indonesian time, Hang Seng fell 3.21% at the level of 22,122 with a correction in the last month of 3.9%.

Bloomberg recently reported, as quoted by Reuters, that China’s housing authority had informed banks that Evergrande would not be able to pay interest on loans due on September 20, 2021 due to liquidity difficulties.

Stock price Evergrande down 13% on first trade of the week.

Evergrande is still trying to extend the payment tenor at a number of banks.

The company is said to have an obligation to reach US$ 305 billion or equivalent to Rp. 4,361 trillion (exchange rate of Rp. 14,300/US$). If there is no solution, it could become a systemic risk in China’s financial sector.

Rating agency S&P downgraded Evergrande’s debt rating from CC to CCC withoutlooknegative. Fitch, another rating agency, also loweredratingEvergrande from CC to CCC+.

According to Fitch, Evergrande’s debt to banks and other financial institutions is CNY 572 billion. In addition, banks also provide loans tosupplierEvergrande worth CNY 667 billion.

Banks with high exposure to Evergrande will be vulnerable to non-performing loans (Non-Performing Loan/NPL). This is what will cause systemic risk.

This shows that Evergrande is too big a company to go bankrupt.Too big to fail. The fall of Evergrande will drag many parties, the risk is too great.

Investor worries about debt Evergrande Group which mounts and the risk of default quickly spread because of Chinese policymakers still keep quiet about whether the government will step in to prevent systemic impact.

CNBC INDONESIA RESEARCH TEAM

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