(New York = Yonhap News) Yoon Young-sook, Yonhap Infomax Correspondent = The New York Stock Exchange has spread risk-averse sentiment due to concerns over the Chinese real estate company Hengda (Evergrande) Group, and the Federal Open Market of the Federal Reserve (Fed) It fell on a sense of vigilance ahead of the regular meeting of the Committee (FOMC).
At the New York Stock Exchange (NYSE) on the 20th (Eastern Time), the Dow Jones Industrial Average closed at 33,970.47, down 614.41 points (1.78%) from the previous day.
The Standard & Poor’s (S&P) 500 index closed at 4,357.73, down 75.26 points (1.70%) from the battlefield, and the Nasdaq, centered on technology stocks, closed at 14,713.90, down 330.06 points (2.19%) from the battlefield.
The Dow was down 2.81% during the day, while the Nasdaq fell 3.42% at one point. The Dow recorded the largest decline since July 19 (2.09% ↓) as of the closing price, while the S&P 500 and Nasdaq Index recorded the largest decline since May 12 (2.14% ↓/2.67% ↓), respectively.
Earlier in the Asian market, the Hong Kong stock market closed more than 3% lower on concerns that the Hengda Group might not be able to pay interest on bonds due on the 23rd.
Hengda Group’s debt is the largest among publicly traded real estate development companies in the world, and there is growing concern among investors that the Chinese government could put Hengda into bankruptcy.
Hengda Group has to pay 83.5 million dollars (about 99 billion won) of interest on five-year dollar bonds with an interest rate of 8.25%, which arrive on the 23rd of this week. According to the bond terms and conditions, if interest is not paid, it is considered as default (default) after a 30-day grace period. On the same day, coupons for 232 million yuan (about 42.5 billion won) of RMB bonds will also expire.
Concerns that Hengda’s bankruptcy could pose a systematic risk to China’s financial markets and, consequently, the global economy, have risen sharply.
While the Chinese stock market was closed for the Mid-Autumn Festival holiday, the aftermath of the Hong Kong stock market had an impact on the global stock market. European stocks are down more than 1%, Bitcoin is down more than 10% during the day, and crude oil prices are down more than 1%.
The impact of Chinese corporate bankruptcies on the US stock market will be limited, but amid growing concerns about austerity ahead of the FOMC meeting, if global risk-averse sentiment spreads, the September correction could gain momentum.
White House spokeswoman Jen Saki said at a press conference that the group was monitoring the situation.
“We are monitoring global markets through the Treasury Department, which primarily includes risk assessments for the U.S. economy,” Saki said. “We are prepared to respond appropriately if necessary.”
Investors are also watching to see what signals the Fed will signal this week about the tapering of its asset-buying program on the 22nd. Investors are also increasingly wary as there is a possibility that changes may appear in the dotplot containing the Fed’s rate forecasts.
The Wall Street Journal, citing analysts’ forecasts, reported that the dot plot could point to more rate hikes, suggesting a hawkish stance.
The S&P 500 Volatility Index (VIX) crossed 26 during the day, the highest since May.
The yield on the 10-year U.S. Treasury bond fell more than 6bp to 1.31% amid risk-averse sentiment. A fall in interest rates means higher bond prices.
By sector, all 11 sectors of the S&P 500 fell, energy fell more than 3%, and consumer discretionary and financial stocks all fell more than 2%. Technology stocks, telecommunications and materials-related stocks all fell more than 1%.
New York Stock Exchange experts said the market was under pressure to sell on concerns about China.
“Stories like the Hengda Group are hard to digest, and it can take some time to understand the real risks associated with these kinds of events,” Lindsey Bell, chief investment strategist at Ally Invest, told MarketWatch.
“Fear has been building in the market for some time, and selling pressure has intensified as the fear index jumped to its highest since May,” he said.
According to the Chicago Mercantile Exchange (CME) FedWatch, the Federal Funds (FF) interest rate futures market reflected a 23.9% chance of a rate hike in September next year.
By the end of the period, the probability of one rate hike is 21.6% and the probability of a second rate hike is 2.2%. All of these are lower than the previous day.
At the Chicago Board Options Exchange (CBOE), the Volatility Index (VIX) recorded 25.71, up 4.0 points (23.55%) from the battlefield.
ysyoon@yna.co.kr
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