A heady combination of Chinese property debt, iron ore prices and US Federal Reserve plans to taper bond purchases conspired to leave a dent in the Australian share market.
In the end teetering Chinese property group Evergrande seems to have survived for now and the US Fed plans to taper were reasonably well received but the yo-yo-ing iron ore price pushed down the miners and saw the ASX 200 lose 0.4% to 7342.6 points on Friday.
That led to the market closing down 0.65% for the week, although some of the really bearish sentiment from early in the week had reversed.
Stability fears over Evergrande ease
Initially there were real fears that the inability of giant and heavily indebted Chinese property group Evergrande to pay its loans as they fell due could lead to a much wider financial contagion within China and also spreading to the rest of the world.
However, after Evergrande avoided defaulting on their debt by negotiating over some interest payments those worries reduced dramatically with indications being that the Chinese property market would continue to limp along without any immediate risks.
The decision by the People’s Bank of China to pump another $US18.6 billion of liquidity into its banking system was also seen as a positive, bringing the amount of cash the central bank has injected since last Friday to about $US50 billion.
Bring on the carve up?
Some reports that authorities are putting together a restructuring and rescue of Evergrande to carve it up between a number of state-owned entities was also greeted as confirmation that China seemed to be keen to do whatever it takes to avoid a big property collapse which could dent the nation’s economic growth.
Mining stocks were oscillating during the week with some predictions saying that the iron ore price could stay below $US100 a tonne well into next year.
A lower iron ore price could leave a big dent in Australia’s economy, although the fact that fast rising and then falling iron ore prices were not extrapolated too much might soften the blow.
Lower iron prices could leave a dent
There is no doubt though that if prices fall below US$100 a tonne for the medium term it would cause significant pain for miners and government budgets.
In the end BHP (ASX: BHP) shares fell 1.72 % to $37.72 on Friday, while Rio Tinto (ASX: RIO) shares rose 0.47% to $99.33 and Fortescue Metals (ASX: FMG) shares fell 1.22% to $15.34.
Some individual company news helped some companies with Solomon Lew’s Premier Investments (ASX: PMV) up 5.5% to $29.15 on Friday after revealing a jump in full year profits on Thursday and plans to acquire any attractive retail businesses that are struggling due to lockdowns.
Similarly, Washington H. Soul Pattinson (ASX: SOL) finished up 3.8% to $39.16 after revealing a solid profit increase.
Energy distribution provider AusNet (ASX: AST) saw its shares fly by 29% during the week after it…
Read More: Debt, iron ore and tapering combine to push share market down