- ASX SPI 200 futures down 0.4% to 7,251.00
- Dow Average up 0.3% to 35,281.40
- Aussie down 0.3% to 0.6497 per US$
- U.S. 10-year yield rose 4.7bps to 4.1522%
- Australia 3-year bond yield rose 4.9 bps to 3.82%
- Australia 10-year bond yield rose 6.4 bps to 4.11%
- Gold spot little changed at $1,913.76
- Brent futures up 0.5% to $86.81/bbl
Asian equities were set to fall on Monday after shares on Wall Street capped off a poor week on a down note and China’s worsening property slump damps sentiment.
Futures for stocks in Australia, Japan and Hong Kong all pointed lower, as did a gauge of US-listed Chinese companies. Country Garden Holdings Co., once China’s largest private-sector developer by sales, is at risk of joining a slew of defaulters and the latest economic data for the nation is likely to show little sign of a rebound in growth.
Meanwhile in Japan, the yen is trading near the closely watched 145 level versus the dollar amid depreciation pressure that has pushed it toward a zone that sparked government intervention last year. The yen weakened for five straight days through Friday while an index of dollar strength has advanced over the last four weeks with elevated Treasury yields.
Friday’s US trading session saw a slide in tech megacaps and mixed economic data leave stocks weak and struggling for direction. In choppy trading, the S&P 500 closed at a one-month low with a drop of just 0.1%. The Nasdaq 100 notched its longest weekly losing streak this year, hovering around 15,000. Nvidia Corp. — which has more than tripled in 2023 — extended a four-day decline to 10%.
Bill Gross, the one-time bond king, said stock and Treasury bulls are wrong as both markets are “overvalued.”
The former chief investment officer of Pacific Investment Management Co. told Bloomberg Television that the fair value of the 10-year Treasury yield is about 4.5%, compared with the current level of 4.15%.
Meantime, Friday’s economic reports did little to alter swap market bets that the Federal Reserve will pause its rate hikes next month. Traders also continued to expect the central bank to signal its battle against inflation isn’t over yet.
Consumer inflation expectations as measured by the University of Michigan unexpectedly fell in early August, despite higher gasoline and grocery costs. Meantime, producer prices grew last month by more than expected, primarily due to increases in certain service categories.
Country Garden Real Estate Group Co Ltd. said it will suspend trading in nearly a dozen onshore bonds starting Monday, two days after the Chinese real estate company’s controlling shareholder said it would report a multi-billion-dollar loss for the first half of this year.
Six yuan-denominated corporate bonds issued in 2021 and 2022 will be suspended from trading effective at the market opening, the company, formerly China’s largest developer by sales, said in filings to Shenzhen Stock Exchange Saturday night.
Three additional corporate bonds will also be subject to suspension on Shanghai Stock Exchange, according to filings on the Chinese bourse. Guangdong Tengyue Construction Engineering Co., a subsidiary of Country Garden Holdings Co., Country Garden Real Estate Group’s controlling holder, made the same decision on one bond. Local media said a Country Garden private placement bond will be suspended as well.
Representatives of Chinese bank CICC told some Country Garden noteholders that its bond-underwriting team has been engaged to explore options for the builder’s yuan-note maturities, Bloomberg reported Friday. The struggling builder is considering extending some soon-to-mature notes, according to people who were involved in the private conversations.
The developments come after China’s sixth-largest developer said in a Hong Kong exchange filing Thursday night that it anticipates posting a net loss of 45 billion to 55 billion yuan ($6.2 billion to $7.6 billion), compared with earnings of 1.91 billion yuan in the first half of 2022.
Country Garden apologized Friday, vowing the firm will take more powerful and effective measures to ensure home delivery and to address periodic liquidity stress, Chairwoman Yang Huiyan and President Mo Bin say in a WeChat statement to investors and clients.
In the statement Saturday, the company said it’s planning to hold meetings with bondholders on the repayment arrangements in the near future. It reiterated it will take measures to defuse risks and protect the legitimate rights of its investors while ensuring home deliveries.
Bonds and shares of Country Garden Holdings Co. have plunged this week after bondholders failed to receive coupon payments of two dollar notes by an initial deadline, raising concern it will be the next property giant to default.
The company’s shares fell as much as 14% Friday in Hong Kong before closing below HK$1 for the first time ever. It has tumbled 63% this year, the worst performer on Hang Seng Index.