HONG KONG, RAW – Asian shares have mainly drifted lower as investors continued to fret over China Evergrande Group’s unsolved debt crisis and eyed the potential impact of a widening power shortage in China.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.13 per cent lower on Tuesday, following a mixed session on Wall Street
In early trade, Australia’s benchmark S&P/ASX200 index was down nearly one per cent, while Japan’s Nikkei was off 0.6 per cent.
China’s blue chip index CSI300 edged up 0.1 per cent at the open, as Hong Kong’s Hang Seng Index gained 0.44 per cent.
The future of Evergrande, the world’s most indebted property developer, is being forensically scrutinised by investors after the company last Friday did not meet a deadline to make an interest payment to offshore bond-holders.
Evergrande has 30 days to make the payment before it falls into default and Shenzen authorities are now investigating the company’s wealth management unit.
Without making reference to Evergrande, the People’s Bank of China (PBOC) said on Monday it would “safeguard the legitimate rights of housing consumers”.
Widening power shortages in China, meanwhile, halted production at a number of factories including suppliers to Apple and Tesla and are expected to hit the country’s manufacturing sector and associated supply chains.
Analysts cautioned the ongoing blackouts could affect the country’s listed industrial stocks.
“What we see in China with the developers and the blackouts is going to be a negative weight on the Asian markets,” Tai Hui, JPMorgan Asset Management’s Asian chief market strategist told Reuters.
“Most people are trying to work out the potential contagion effect with Evergrande and how far and wide it could go. We keep monitoring the policy response and we have started to see some shift towards supporting homebuyers which is what we have been expecting.”
On Wall Street, the Dow Jones Industrial Average rose 144.36 points, or 0.41 per cent, to 34,942.36, the S&P 500 lost 4.57 points, or 0.10 per cent, to 4,450.91 and the Nasdaq Composite dropped 68.29 points, or 0.45 per cent, to 14,979.41.
Rising bond yields prompted a shift from growth to cyclical stocks in the USnited States, in a move that analysts expect could become more permanent after a prolonged period of supressed bond yields.
US Treasury yields soared to a three-month high, touching 1.516 per cent overnight following the Federal Reserve’s move last week to indicate fiscal stimulus could be tapered as early as November.
US investors are looking ahead to speeches later this week from several senior Fed officials, as well as keeping an eye on any developments at China Evergrande, broker Ord Minnett said in a note.
In Asian trade, the dollar was up nearly 0.1 per cent in line with its performance in the international session Monday after it rose alongside bond yields.
Gold was flat, while Brent crude oil was down 0.2 per cent.