(Bloomberg) — China’s worsening property slump dampened market sentiment as the nation’s equities extended a selloff. Treasury yields edged toward new highs.
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An Asian equity gauge was set for its lowest close since June as stocks fell across the region. Shares in mainland China declined while almost all of the 80 members of Hong Kong’s Hang Seng Index slipped. The CSI 300 Index, which is the benchmark of onshore Chinese shares, is now close to erasing all of the gains it made after the Politburo meeting last month amid signs of deterioration in the economy. Europe and US equity futures wiped out earlier gains to trade lower.
Treasury yields edged up toward levels last seen in November after producer prices in the US on Friday increased more than expected, threatening to help keep rates higher for longer. That also boosted the dollar.
Country Garden Holdings Co., once China’s largest private-sector developer by sales, is in the spotlight as the company is at risk of joining a slew of defaulters if it fails to make coupon payments on two dollar bonds within a 30-day grace period. Its shares dropped more than 19% in Hong Kong on Monday, after closing below HK$1 for the first time ever last week.
Investors at the moment are not pricing in the possibility that Chinese officials will come in with the necessary toolkit to improve the situation, according to Yan Wang, chief emerging-market and China strategist at Alpine Macro Inc.
“There’s plenty of pessimism,” he said on Bloomberg Television. “Some of the developers obviously are trading at very depressed levels. So the market is not pricing for that.”
Recent data shows China’s bank loans slid to a 14-year low, consumer and producer prices both declined, and exports slid the most since February 2020. Adding to the jitters is news that one of China’s largest largest private wealth managers missed payments on investment products sold to the nation’s high-net worth clients and corporations, stoking fears more defaults may happen in such products.
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