Domestic, global markets face big crack today due to China’s Evergrande; know why

Domestic, global markets face big crack today due to China’s Evergrande; know why

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The domestic and global markets witnessed a big crack today. The Sensex crashed massively and closed after a downfall of 525 points. On the same side, the Nifty and the Bank Nifty moved southward and dipped 188 points and 666 points, respectively. However, there was a slight recovery witnessed during the daytime in the Nifty.

Similarly, the European market slipped 2 per cent. The Dow Futures also nosedived. This fall was due to China. China’s second-biggest real estate developer Evergrande is in big trouble. The company is on the verge of bankruptcy.

Senior Research Analyst Kushal Gupta shares the details about the reality developer Evergrande. He said that the company was facing default issue. Evergrande has been scrambling to raise funds to pay its many lenders, suppliers and investors. With regulators warning that its $305 billion of liabilities, which is 2 per cent of China’s GDP, could spark broader risks to the country’s financial system if not stabilised.

Now the global investors are cautions and doubting the company that it might not be able to repay the debts. As the company has already mentioned that the cash flow that it was expected to receive might get impacted, Gupta said.

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He added that Evergrande is due to pay $83.5 million interest on 23rd September for its March 2022 bond. It has another $47.5 million interest payment due on 29th September for March 2024 notes. Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates.

In any default scenario, Evergrande will need to restructure the bonds but analysts expect a low recovery ratio for investors.



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