PBOC Supplies 20 Trillion Won in Short-Term Liquidity... Evergrande Group Stock Price Rebounds

People's Bank of China [Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] The People's Bank of China, the central bank of China, supplied the largest amount of short-term liquidity in eight months, totaling 110 billion yuan (approximately 20 trillion won), Bloomberg reported on the 23rd (local time).

This move is interpreted as a measure to prevent market turmoil caused by negative news from the major real estate developer Evergrande Group and to prepare for increased funding demand in the financial sector ahead of the quarter-end.

The People's Bank of China supplied liquidity through 7-day and 14-day repurchase agreement transactions on the day. The 110 billion yuan is the largest amount of short-term liquidity supplied since January this year.

Following the liquidity supply measure by the People's Bank of China, Evergrande Group's stock price, listed on the Hong Kong stock market, rebounded and surged up to 32% in early trading that day.

Evergrande Group's stock price has plummeted from 14 Hong Kong dollars at the beginning of the year to around 2 Hong Kong dollars currently. Even during the Chinese stock market holiday on the 20th and 21st, Evergrande Group's stock price fell by more than 10%.

However, after the Chinese stock market resumed trading following the holiday, it appears that the market has not been significantly affected by Evergrande Group's negative news. The Shanghai Composite Index rose 0.4% in trading on the previous day after reopening for the first time in five days and continued a slight upward trend on the 23rd.

Evergrande Group issued a statement the day before, announcing that it would pay the interest on its yuan-denominated bonds scheduled for the 23rd, which seems to have somewhat alleviated market anxiety.

However, uncertainty remains as Evergrande Group must also repay interest on its dollar bonds amounting to 835 billion dollars. Evergrande Group has not disclosed whether it will pay the interest on the dollar bonds. It is known that there is a 30-day grace period for the dollar bonds. The bond interest that Evergrande Group must pay by the end of this year is estimated to be about 669 million dollars.