Market Talk – Monday, Dec. 14


Despite claims of an economic recovery, Chinese state-owned companies are defaulting on their debts. A string of missed debt repayments by major firms has shaken local as well as global markets. State firms defaulted on a record $6.1 billion worth of bonds between January and October, according to Fitch Ratings. That’s about as much as the last two years combined. The development has rattled China’s nearly $4 trillion corporate debt market, of which state-owned enterprises are estimated to account for more than half. At least 20 firms suspended plans for new debt issues totaling $2.4 billion, all citing recent market turmoil. The mounting non-payment of debt payments is getting worse in recent weeks. A slew of major companies, including German automaker BMW’s Chinese partner Brilliance Auto Group, top smartphone chipmaker Tsinghua Unigroup, and Yongcheng Coal and Electricity declared bankruptcy or defaulted on their loans in November. According to Reuters, the Huachen Automotive Group Holdings Co, the parent of German automaker BMW’s Chinese joint venture partner, defaulted late last month exemplifying opaque risks, underdeveloped pricing mechanisms, and investor naivety in China’s corporate bond market.

The Indian economy could grow at over 11 percent in the 2022 financial year, as it has rebounded spectacularly after the initial loss of production due to COVID-19 this year, said N Chandrasekaran, Chairman, Tata Sons. India’s GDP had contracted by 7.5 percent in the second quarter, a significant improvement from the unprecedented 23.9 percent plummet in the first quarter. More recent economic numbers show further improvement. India’s index of industrial output in October was 3.6 percent, against 0.5 percent in September, as per the Index of Industrial Production (IIP) data released by the government on December 11. The IIP growth was an eight-month high.

Japanese business sentiment improved at the fastest pace in nearly two decades in October-December, a key central bank survey showed, a welcome sign for the economy as it emerges from the initial hit of the coronavirus pandemic. The headline index for big manufacturers’ sentiment improved to minus 10 in December from minus 27 in September, the Bank of Japan’s “tankan” survey showed on Monday, still a negative reading but marking the second straight quarter when companies were less pessimistic about business conditions.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 79.92 points or 0.30% to 26,732.44
  • Shanghai increased 21.93 points or 0.66% to 3,369.12
  • Hang Seng decreased 116.35 points or -0.44% to 26,389.52
  • ASX 200 increased 17.60 points or 0.26% to 6,660.20
  • Kospi decreased 7.86 points or -0.28% to 2,762.20
  • SENSEX increased 154.45 points or 0.34% to 46,253.46
  • Nifty50 increased 44.30 points or 0.33% to 13,558.15
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