Tech Companies Squeeze Nikkei, Evergrande Wins in Hong Kong

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On the stock exchange in Tokyo on Wednesday, tech companies were under pressure in the wake of the heavy loss of the American technology exchange Nasdaq. Investors were also awaiting the outcome of the leadership election of the ruling Japanese party LDP.

 

Japanese stock prices have surged this month in hopes that Prime Minister Yoshihide Suga’s successor, who announced his departure in early September, will do more to boost the economy. In Hong Kong, the ailing Chinese real estate group Evergrande jumped in price after announcing the sale of a part.

The Hang Seng index in Hong Kong wiped out a previous loss and gained 0.4 percent, thanks in part to a gain of almost 11 percent for Evergrande. The Chinese government appears to be urging state-owned companies to buy up some of Evergrande’s assets. For example, the financially distressed company sells an interest of more than 1.3 billion euros in Shengjing Bank to the Chinese state-owned company Shenyang Shengjing Finance Investment Group. Shengjing Bank, one of Evergrande’s main lenders, is demanding that the real estate group use the sale proceeds to pay off its debts with the bank.

Evergrande also has to make an interest payment on some of its loans on Wednesday. Last Thursday, the company already missed the deadline for interest payment on another loan. As a result, credit bureau Fitch lowered its credit rating for Evergrande and its subsidiaries Hengda and Tianji on Wednesday. After missing a payment deadline, the company has 30 days to meet its financial obligations before being labelled a defaulter.

The Nikkei in Tokyo closed 2.1 percent in the minus at 29,544.29 points. Tech companies such as Tokyo Electron, Daikin Industries and Advantest fell to 5 percent. Major tech investor SoftBank lost nearly 2 percent. The tech sector, which has risen sharply in value, is struggling with rising interest rates in the financial markets. Higher interest rates negatively affect the future profits of these high-growth companies, making current price valuations appear too high. Airline stocks and transportation companies, on the other hand, showed small gains after news that the state of emergency in parts of Japan due to the corona pandemic will end on Thursday.

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