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Chinese property developer Evergrande faces US$ 300 bil. debt: potential impact on Korea's stock market
Updated: 2021-09-23 13:43:46 KST
Investors are keeping a close eye on Chinese property developer Evergrande, which is at risk of collapse due to huge debts.
Founded in 1996, Evergrande is one of the China's largest developers…building and selling millions of apartments each year mainly for middle-class Chinese families.
The company has more than 13-hundred real estate projects in 280 cities in China, and employs 200-thousand workers.
Twice last week, Evergrande warned investors that it could default on its 300 billion U.S. dollar debt, which is as much as two percent of China's GDP.
This caused volatility especially on Asian stock markets since the firm's shares and bonds are included in indexes across Asia.
Korea's benchmark KOSPI closed point-four percet lower on Thursday.

Though Evergrande calmed fears of an imminent default as it said Wednesday that it would make a payment on a domestic bond worth about 35 million U.S dollars that was due on Thursday, the company faces repayment deadlines for staggering amounts of money coming up over the next few years.

But experts say it is unlikely that Evergrande will spark a global financial crisis in the same way the collapse of U.S. bank Lehman Brothers did in 2008, and it also won't have a major impact on Korea's stock market.

"When the Lehman brothers scandal broke out, mortgage derivatives were spread across the global market, but most of Evergrande's debt is in Yuan meaning the issue is highly likely to remain in the domestic market. And because of this even though the potential default of Evergrande can pose emotional pressure on investors, the KOSPI South Korea's benchmark stock index, is unlikely to face panic-selling."

The expert added that the main concern is that the Korean economy is highly dependent on China when it comes to exports, and the world's second largest economy could be hit hard if its giant real estate developer goes bankrupt since it owes money to banks, retail investors and suppliers.
Bank of America on Tuesday lowered China's economic outlook this year from eight.three percent to eight percent due to concerns over Evergrande.
Seo Eunkyung, Arirang News.
Reporter : ekseo@arirang.com