Chinese markets are feeling the heat from the latest drama surrounding two property developers: Evergrande and Donald Trump. The latter will potentially have more impact.
A Hong Kong court this week ruled that, two years after it defaulted on its debt, Evergrande should be liquidated. Further tension lies ahead in the form of a tussle over whether mainland Chinese authorities will carry out this act of euthanasia. If they do, it will come as no surprise to any remaining foreign investors, who are already sitting on worthless assets, that they are likely to be right at the end of the queue for any payments.
The whole ugly scene is not exactly comforting for markets, which are already wearing the scars of sluggish Chinese economic data. Hong Kong’s Hang Seng stocks index has fallen 7.5 per cent this year — a decent drop considering we have only just started the second month of 2024. China’s CSI 300 is 6 per cent lower. Authorities have responded with various efforts to prop stocks up, with little obvious success. It is not a pretty picture.