What Does Evergrande’s Debt Crisis Mean For American Investors?


  • Evergrande, a Shenzhen-based business, is on the verge of defaulting on a $300 billion debt.

Evergrande, the Shenzhen-based company, is facing a default on its debt burden of roughly $300 billion, and The crisis has echoed the Lehman Brothers bankruptcy, which marked its 13th-anniversary last week, reports CNBC.

Ed Yardeni, president of Yardeni Research, says it’s unlikely Evergrande will have a fallout quite as severe as the Lehman bankruptcy when the global economy and credit markets collapse. Instead, he sees it as analogous to a different event a decade even earlier.

Markets collapsed

“If it’s similar to anything, it’s similar to Long-Term Capital Management, which is the calamity that occurred in 1998 but that was dealt with very quickly by the Federal Reserve and the major banks, and it didn’t have any global implications,” Yardeni told CNBC’s “Trading Nation.”

Even if a crisis tied to Evergrande is avoided, Yardeni does not see Chinese markets rebounding anytime soon. He says Evergrande is just one reason for investors to avoid the region.

Chinese stocks

“If you’re invested in Chinese stocks, there have been lots of reasons to get out, quite honestly,” said Yardeni. “The Chinese Communist Party which runs the government over there has been meddling, intervening in the markets, interrupting corporate governance, telling companies how they should manage their businesses. And so I think it’s a good opportunity here just to lie low. I would not be buying on the dips in China.”

Beijing has tightened regulations on industries such as technology and private education in recent months. That increased scrutiny has taken their markets and U.S.-listed Chinese stocks lower. Continued uncertainty in China could be a benefit for U.S. markets, he added.

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Source: CNBC


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