A 'Lehman moment' may not be in the cards, but investors should still be aware of risks surrounding the Evergrande crisis, analysts say.
U.S. stock-market investors appear to have largely put worries over China Evergrande, the Chinese property giant teetering on the brink of default, behind them. But analysts argue that the stakes will remain high as the situation plays out in coming weeks and months.
Financial markets soon found their footing, with equities roaring back Wednesday and Thursday, turning major U.S. indexes positive for the week. Worries about Evergrande appeared to ebb as the People’s Bank of China pumped significant liquidity into the financial system. Extra Credit: ‘A different kind of moral hazard’: The history and politics behind the Evergrande debt crisis
Even before those developments, Wood and other Wall Street analysts and economists were quick to dismiss notions that the threat posed by Evergrande could turn into an echo of the 2008 collapse of Lehman Brothers, which set off the chronic phase of the global financial crisis.But many of those same experts have noted that a number of unknowns continue to surround Evergrande, including exactly how Beijing plans to manage a widely expected default.
Danske Chief Market Analyst Alan von Mehren earlier this week noted that Evergande has $669 million in coupon payments remaining this year. A default could trigger further volatility in Chinese markets with some spillover to global markets, he said, arguing that some sort of “circuit breaker” would be needed to keep investors calm and halt a negative spiral.
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