Global Markets See Steep Losses as China’s Evergrande Feeds Fear

Signage on the trading floor at the New York Stock Exchange in Manhattan, New York, on Aug. 4, 2021. Andrew Kelly/Reuters

World stocks flagged a negative sign as steep falls kicked off the new week on Monday. Chinese property developer Evergrande’s escalating liquidity crisis had triggered concerns about spillover risks and widespread pessimism in global markets.

MSCI’s all-country world equity index shed 1.63 percent, its biggest one-day percentage fall day in about two months, as Wall Street’s benchmark Dow Jones Industrial Average fell  1.8 percent, S&P 500 sagged 1.7 percent, and the tech-heavy Nasdaq tumbled 2.2 percent.

The Stoxx Europe 600 dropped 1.7 percent. German market index DAX dropped by fell 2.6 percent in early trading on Monday to its lowest level since July, as UK flagship index FTSE 100 fell 0.9 percent, ending at a two-month low.

It came after Hong Kong’s Hang Seng index had fallen 3.3 percent to its lowest close in over a year; The Hang Seng Property sub-index tumbled 6.7 percent, flagging the biggest drop since May 2020.

Data show the selloff on Monday has seen a cumulative $2.2 trillion of value wiped off the market capitalization of world equities from a record high of $97 trillion hits on Sept. 6.

Investors moved into safe havens, with U.S. Treasuries gaining at price, pulling down yields, and gold rising.

Meanwhile, Evergrande, China’s property giant that has been scrambling to raise funds to pay its lenders, suppliers, and investors, closed down 10.2 percent at HK$2.28 ($0.29). So far this year, its Hong Kong-listed shares have collapsed by over 80 percent.

Regulators have warned its $305 billion of liabilities could spark broader risks to China’s financial system if its debts are not stabilized. Experts estimated that the property-related activity of Evergrande contributes about 30 percent to China’s GDP.

Reuters contributed to this report.