Markets sell off on contagion fears from China's Evergrande
CBC
Financial markets around the world had their worst day in weeks on Monday, as worries about embattled Chinese property developer Evergrande had investors worried about what the fallout might be.
The Toronto Stock Exchange was off by about 500 points, or about 2.5 per cent, nearing midday, while in New York the Dow Jones Industrial Average fell by 800 points for a similar percentage point drop.
The main catalyst for the gloom was Chinese property firm Evergrande, a real estate developer that appears to be crumbling under a $300 billion US debt load. The company missed an $80 million interest payment on its debts on Monday, and is poised to miss another bond payment on Thursday, which has prompted fears the company may default.
While a total collapse is unlikely, a potential violent unwinding of China's property bubble spooked investors around the world about where the reverberations may be felt.
"Fears that this could potentially ignite a wider financial crisis have been weighing on world markets to start the new trading week," said Colin Cieszynski, a strategist with SIA Weath in Toronto.
Financials were hit hardest, even though the vast majority of Evergrande's debt load is held by Chinese lenders.
"You're seeing the banks sell off most, because that's the area of uncertainty," said Kash Pashootan, CEO of Toronto-based investment firm First Avenue Investment Counsel. "Does this affect how they decide to lend moving forward? Do they have some of this on their books?"
