Stock prices in London were in the red on Monday after Chinese property developer Evergrande announced it was unable to carry out a restructuring plan aimed at its survival.
The FTSE 100 index opened down 15.48 points, or 0.2%, at 7,668.43. The FTSE 250 was down 72.97 points, or 0.4%, at 18,533.87, while the AIM All-Share was down just 0.31 of a point at 739.12.
The Cboe UK 100 was down 0.2% at 765.14, the Cboe UK 250 was down 0.6% at 16,185.85, and the Cboe Small Companies was down 0.3% at 13,350.09.
Shares in Chinese property developer Evergrande plummeted Monday following the announcement that it would be unable to carry out a restructuring plan intended to guarantee its survival.
The company’s shares were down 20% in Hong Kong around the time of the London equities open, trading at around HK$0.45 per share.
On Sunday evening, Evergrande announced that it was unable to issue new debt as its subsidiary, Hengda Real Estate Group, ‘is being investigated’.
This came two days after the company said meetings on the restructuring scheduled for Monday and Tuesday would not take place, saying it was ‘necessary to reassess the terms’ of the plan in order to suit the ‘objective situation and the demand of the creditors’.
Evergrande’s enormous debt has contributed to the country’s deepening property market crisis, raising fears of a global spillover.
The property sector, which along with construction accounts for about a quarter of China’s gross domestic product, is a key pillar of the country’s growth and has experienced a dazzling boom in recent decades.
But the massive debt accrued by the industry’s biggest players – Evergrande had estimated debt of $328 billion at the end of June – has been seen by Beijing in recent years as an unacceptable risk for China’s financial system and overall economic health.
Stocks in China struggled on Monday amid fresh concerns for the already fragile property sector. The Shanghai Composite closed down 0.5%, while the Hang Seng index in Hong Kong traded 1.6% lower.
In London, miners suffered in early morning trade due to their exposure to the Chinese economy. Rio Tinto was down 2.8%, Antofagasta down 2.3%, Anglo American down 1.5% and Fresillo down 1.4%.
Entain was the worst performer in the FTSE 100, however, losing 4.6% in early morning trade after it announced its online net gaming revenue had been softer than anticipated during the third quarter of the year.
Nonetheless, the Ladbrokes owner reiterated its expectation for full-year earnings before interest, tax, depreciation and amortisation to be within the range of £1.0 billion and £1.05 billion. This would be up from $993.2 million in 2022.
CRH added 2.7% as it confirmed its primary listing has now transferred to the New York Stock Exchange following approval from the Irish High Court. The company’s shares on the London Stock Exchange now move to a standard listing from a premium listing.
Aviva edged 0.4% lower as it announced the acquisition of AIG Life from Corebridge Financial, a subsidiary of American International Group, for £460 million.
The insurer said AIG Life UK provides a full suite of individual and group protection products, with 1.3 million individual protection customers and 1.4 million group protection members.
‘This acquisition brings significant strategic and financial benefits to Aviva. It strengthens our prospects in the highly attractive UK protection market and continues our progress in repositioning the group towards capital-light growth,’ said Chief Executive Amanda Blanc.
In the FTSE 250, Close Brothers rose 2.5% after JPMorgan raised the merchant banking group to ’neutral’ from ’underweight’.
Elsewhere in London, Alphawave IP Group lost 6.6% as it reported it had swung to a pretax loss of $11.2 million in the first half of 2023 from a profit of $22.2 million the year prior.
The loss came as Alphawave’s cost of sales surged to $104.7 million from just $1.8 million and its research & development costs climbed to $35.5 million from $25.2 million.
More positively, the company’s interim revenue jumped to $187.2 million from $57.1 million thanks, in part, to the contribution of OpenFive.
Looking forward, Alphawave reiterated its full-year outlook which sees revenue between $340 million and $360 million and adjusted earnings before interest, tax, depreciation and amortisation at around $87 million.
In Tokyo on Monday, the Nikkei 225 index close up 0.9%. The S&P/ASX 200 in Sydney closed up 0.1%.
In European equities, the CAC 40 in Paris was marginally lower, while the DAX 40 in Frankfurt was down 0.1%.
The pound was quoted at $1.2241 at early on Monday in London, down from $1.2267 at the London equities close on Friday. The euro stood at $1.0640, lower against $1.0664. Against the yen, the dollar was trading at JP¥148.40, higher compared to JP¥148.22.
The dollar gained ground amid expectations that interest rates will be kept elevated for longer in the face of stubborn inflation.
On Wednesday, the US Federal Reserve left its benchmark interest rate at a 22-year high on Wednesday but signalled it still expects one more hike before the end of the year.
In the US on Friday, Wall Street ended lower with the Dow Jones Industrial Average down 0.3%, the S&P 500 down 0.2% and the Nasdaq Composite down 0.1%.
Brent oil was quoted at $92.53 a barrel at early in London on Monday, up from $92.32 at the London equities close on Friday. Gold was quoted at $1,924.20 an ounce, lower against $1,927.93.
Still to come on Monday’s economic calendar, the US Chicago Fed national activity index will be released at 1330 BST.
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