Stock markets derailed by China’s Lehman moment

On Monday 20 September, global stock markets fell sharply. The fall was precipitated by rising inflation and plunging share prices in the Chinese property company, Evergrande. The shares fell 19% in the morning hitting an all time low. Eventually, the shares closed at 10.2% in Hong Kong on Monday evening.

Evergrande has debts of over $300 billion which could trigger a broader fallout in China’s financial system. Some commentators described the moment as “China’s Lehman moment”. The falling markets appears contagious as it spreads globally.

Meanwhile, the Guardian reported: “The company, China’s second-biggest developer which owes $300bn to contractors, investors and homebuyers, dragged the Hang Seng index down to its lowest point for nearly a year.”

Monday blues! Hang Seng Index drops 3% as #China worries related to #Evergrande, the second-biggest property developer in China with about USD 300 billion in #debt, spike. pic.twitter.com/mj7jHTyFvK

— jeroen blokland (@jsblokland) September 20, 2021

Markets globally came under pressure to sell, with the FTSE 100 in the UK falling by 60 points, or 0.9%, to 6,903.

Europe’s Stoxx 600, a pan-European index of listed companies, closed down 1.7%. Shares fell by more than 2% in Germany, France and Italy and 1.2% in Spain.

US markets also fell sharply, with the Dow Jones losing 1.7%. The S&P 500 closing 1.6% lower and the tech-heavy Nasdaq down more than 2%.

Investors are anxious about rising Covid cases and growing inflation as the global economy attempts to heal after the pandemic. However, there was a rally in airline shares after the Biden Administration announced that the US was lifting its travel ban for travellers.