Category: Stock Market

AGL Energy Limited’s (ASX: AGL) stock is gaining today despite the company’s chair stating its share price’s recent performance is “not acceptable”.  

AGL’s chair Peter Botten made the comments at the company’s annual general meeting (AGM) today. There, he acknowledged financial year 2021 was “extremely challenging” for AGL and “very disappointing” for its shareholders.

On a more positive note, the board managed to avoid a spill as more than 75% of shareholders voted in favour of AGL’s remuneration resolution.

Botten put the company’s poor performance down to low wholesale electricity prices and increasing demand for decarbonisation.

Despite the chair’s unenthusiastic address, the company’s share price is in the green.

At the time of writing, the AGL share price is $5.71, 3.53% higher than its previous close.

Let’s take a closer look at AGL’s AGM.

Here’s what happened at AGL’s AGM

The AGL share price has climbed following the boss’s acknowledgment of its poor performance.

Over the course of financial year 2021, the AGL share price fell a massive 59%.

According to the company’s chair, the company’s struggles have resulted from operating and market headwinds.

Such challenges were supposedly identified by the company years before. However, their impact was miscalculated before being worsened by COVID-19 and mild weather.

Additionally, Botton stated the transition to decarbonisation hit the AGL share price hard as the company’s position as Australia’s largest carbon emitter weighed on the market.

As a result, AGL is planning to “lean harder” towards renewable energy.

Botton also reconfirmed the company’s outlook for the current financial year. It expects to see earnings of between $220 million and $340 million – a “material reduction” on that of financial year 2021.

The company’s CEO Graham Hunt outlined the company’s plans to change the running of its coal-fired power plants.

Hunt stated AGL will be creating more of its coal-fired power when demand is at its highest. This will allow for more downtime.

It also plans to undergo its much-anticipated demerger in the new year.

Botton noted the support for a motion to force the company to provide emissions reductions in line with the Paris Agreement. However, the motion didn’t manage to get to a vote.

Because of the demand, Botton reiterated AGL will provide emissions reduction targets before the demerger occurs, saying:

The success and speed of the transition [towards decarbonisation] will require an effective level of coordination between government, regulators and industry and the board does not believe it is in the best interests of AGL to make this commitment unilaterally.

The task is to create a glide path rather than a crash landing.

AGL share price snapshot

The AGL share price hasn’t rebounded from its dramatic drop in financial year 2021.

It is still 52% lower than it was at the start of 2021. It has also fallen 20% over the last month.

The post AGL (ASX:AGL) share price gains 3% as chair acknowledges ‘very disappointing year’ appeared first on The Motley Fool Australia.

More reading

• The AGL (AGL) share price hit multi-decade lows last week. What’s next?
• Why the AGL (ASX:AGL) share price is in focus on Monday
• These were the worst performing ASX 200 (ASX:XJO) shares last week
• AGL (ASX:AGL) share price falls amid ASA’s planned push for Paris targets
• Why AGL, BHP, IRESS, & Lendlease shares are dropping

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Motley Fool Australia Chief Investment Officer Scott Phillips joined Nine’s Late News on Tuesday night to discuss the unfolding Evergrande saga, a bit of bargain hunting among resources investors, and the ongoing demand for infrastructure companies among private equity investors and Super funds.

The post Evergrande on investors’ minds and miners in focus. Scott Phillips on Nine’s Late News appeared first on The Motley Fool Australia.

More reading

• What this leading broker is saying about the AusNet (ASX:AST) acquisition saga
• BHP (ASX: BHP) share price lifts as China fears abate…for now
• Why Champion Iron, Fortescue, Lake Resources, & Zip are racing higher
• Why the Fortescue (ASX:FMG) share price is up 5% today
• ASX 200 jumps as Evergrande confirms it will meet next interest repayment

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It’s no secret that ESG (Environmental, Social and Corporate Governance) and ethical investing have taken off as hot investing trends over the past few years. The idea that investors can make both a healthy return, as well as investing in the companies driving the transition to a cleaner, greener future, has proved to be very appealing. And when there is a hot trend in the share market, you can bet there will be exchange-traded funds (ETFs) following it.

The ASX has indeed seen a rise in the popularity of ethical or ESG ETFs. The ones that are already on the ASX boards have seen their assets under management soar in recent years. An example would be the BetaShares Global Sustainability Leaders ETF (ASX: ETHI).

But now, another ESG ETF is set to join these ranks.

The ASX gets a new ESG ETF

This new ETF comes from fund manager Janus Henderson Group (ASX: JHG). It will be known as the Janus Henderson Global Sustainable Equity Active ETF (ASX: FUTR). This ETF will follow an ‘active ETF’ model. This means it won’t be an index fund. Instead, it will track a concentrated portfolio of shares, selected and maintained by a fund manager and team. The underlying fund that this new ETF will track has been around for decades over in the United States and other countries. But it is now available on the ASX as well.

Janus Henderson tells us that the fund will invest in a “high-conviction portfolio”. The shares that make the cut will be “selected for their compounding growth potential and positive impact on the environment and society”. It will also actively avoid any company “that the investment manager considers to potentially have a negative impact on the development of a sustainable global economy”.

This new ESG ETF will aim to outperform its benchmark MSCI World Index over rolling 5 year periods. It will charge its investors a management fee of 0.8% per annum. FUTR will also aim to pay out a dividend distribution semi-annually if circumstances allow. The fund will also have a cash ceiling of 20%. This means at least 80% of funds will be invested at all times.

The manager has released an initial portfolio for this ETF. It includes mostly international companies like Microsoft Corporation (NASDAQ: MSFT), Autodesk, Inc. (NASDAQ: ADSK) and Adobe Inc (NASDAQ: ADBE). As well as Taiwan Semiconductor Manufacturing Company Ltd (NYSE: TSM) and Nintendo Co,. Ltd (TYO: 7974). It even has a small allocation to the ASX’s own Nanosonics Ltd. (ASX: NAN).

The post New ESG ETF targets booming ethical shares market appeared first on The Motley Fool Australia.

More reading

• AGL (ASX:AGL) share price gains 3% as chair acknowledges ‘very disappointing year’
• Evergrande on investors’ minds and miners in focus. Scott Phillips on Nine’s Late News
• Top brokers name 3 ASX shares to buy today
• What this leading broker is saying about the AusNet (ASX:AST) acquisition saga
• Own Telstra (ASX:TLS) shares? Then you’re helping develop flying cars

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Autodesk, Microsoft, Nanosonics Limited, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adobe Inc. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. The Motley Fool Australia has recommended Adobe Inc. and Autodesk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

ARB Corporation Limited (ASX: ARB)

According to a note out of Morgan Stanley, its analysts have commenced coverage on this 4×4 accessories company’s shares with an overweight rating and $56.00 price target. Morgan Stanley likes the company due to its strong market position globally. It believes this leaves ARB well-positioned for growth in the coming years. Particularly given its store rollout plans in the United States. The ARB share price is trading at $47.46 this afternoon.

Baby Bunting Group Ltd (ASX: BBN)

A note out of Citi reveals that its analysts have upgraded this baby products retailer’s shares to a buy rating with an improved price target of $5.98. The broker made the move partly on valuation grounds following a pullback in the Baby Bunting share price since its results. The broker feels Baby Bunting is well-placed to deliver a solid update at its annual general meeting next month. This is due to the non-discretionary nature of its products and its strong offering. The Baby Bunting share price is fetching $5.39 today.

South32 Ltd (ASX: S32)

Analysts at Macquarie have retained their outperform rating and lifted their price target on this mining giant’s shares to $4.30. This follows news that its Alumar aluminium smelter in Brazil will be restarted next year. In response to the news, the broker has lifted its aluminium production forecasts and earnings estimates accordingly. The South32 share price is trading at $3.36 on Wednesday.

The post Top brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

More reading

• South32 (ASX:S32) share price edges higher after plan to restart Brazil plant
• Baby Bunting (ASX:BBN) share price surges higher on broker upgrade
• Here are the ASX 200’s most active shares this Tuesday
• Why Atlas Arteria, Baby Bunting, De Grey Mining, & New Hope are pushing higher
• 2 strong ASX retail shares that could be buys

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ARB Corporation Limited and Baby Bunting. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The AusNet Services Ltd (ASX: AST) share price has dipped 4% into the red during afternoon trade on Wednesday.

AusNet shares have been on a wild ride over the last week after a bidding war started over the company and its assets.

Let’s take a closer look.

What led us to this point?

AusNet’s share price has been on liftoff since a company announcement on Monday. Brookfield Asset Management made a non-binding offer to acquire the energy distributor for $2.50 per share.

At the time, the offer represented a 26% premium to AusNet’s closing price from the previous Friday.

But then, electricity giant APA Group (ASX: APA) stepped into the ring. APA Group upped the ante by putting down a $2.60 per share offer to acquire AusNet.

However, AusNet had already entered into a period of exclusivity with Brookfield, meaning it can’t consider APA’s offer. AusNet must wait until the due diligence period of 8 weeks is done.

As The Motley Fool’s James Mickleboro reported last week, there are “a couple of potential scenarios” that could arise before this time. One being that AusNet could accept the “lower, but binding offer” from Brookfield versus risking throwing it away in favour of the 10 cents/share gain.

Nonetheless, investors will have until November to observe the AusNet share price in preparation for Brookfield’s assessment.

What are the experts saying?

One leading broker has weighed in on the debate and sees headwinds for both opponents involved with the deal.

Investment banking giant UBS doesn’t see a rosy path for Brookfield from Australian regulators, should it proceed with the acquisition.

The broker understands that Brookfield will have a tough time convincing Australia’s Foreign Investment Review Board (FIRB) to support its deal – even if it beats APA to the finish line.

It believes that Australia’s Cyber and Infrastructure Security Centre “may consider” electricity transmission “one of the most critical types of infrastructure from a national security perspective.” UBS sees this “potentially applying a very high bar” for FIRB approval.

With respect to APA’s bid, it believes the energy rival may not have the backing to overturn Brookfield’s offer.

The reason is because of Brookfield’s own asset base, and how this can interlock with AusNet’s energy assets.

It understands that Brookfield “could allow” AusNet’s major shareholders, State Grid and Singapore Power – around 20% and 32.75% owners respectively – to “roll their equity into the new unlisted entity”.

However it is “less confident of such ability” under APA’s proposal, which “may weaken the shareholder appeal” of its offer.

And the AusNet share price…?

Either way, it appears that AusNet shares could be worth keeping an eye on in the coming months as more rolls out with this deal.

At the time of writing, the AusNet share price is trading 3.86% lower at $2.49 apiece.

The post What this leading broker is saying about the AusNet (ASX:AST) acquisition saga appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Evergrande news boosts market, Zip’s Indian investment
• AusNet (ASX:AST) share price down 5% amid takeover battle uncertainty
• Why APA, Kathmandu, Nickel Mines, & Sigma shares are dropping
• Which ASX 300 shares are the biggest winners and losers on Tuesday?
• ASX 200 (ASX:XJO) midday update: APA makes AusNet bid, New Hope results impress

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended APA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Here’s what could be powering the Telstra Corporation Ltd (ASX: TLS) share price today.

The telco giant prides itself as a barometer of innovation. The telecommunications behemoth has looked to continue this inclination with its recent partnership.  

Let’s take a look at what’s new with Telstra.

Telstra to help launch flying car series

The Telstra share price could be poised to benefit from the company’s recent initiative.

The telco giant announced today its technology services business Telstra Purple will help launch an electric vehicle racing series.

Telstra’s services arm revealed a 12-month communications partnership with Adelaide-based manufacturing business Alauda.

Although Telstra won’t be participating in manufacturing, the telco will provide vehicle to vehicle and vehicle to infrastructure communications.

In a statement released earlier today, Telstra noted;

Telstra Purple will deliver the near real-time virtual race-control system required for the high-speed, close format, multi-vehicle circuit racing in the Airspeeder EXA series.

The premise of the EXA series is to complete a “Formula One–style” series of races in order to promote electric flying vehicles.

Alauda’s Airspeeder Mk3, which are four metre long multicopters, will be remotely piloted as part of the world’s first racing series for electric flying cars

In addition to vehicle to vehicle communication, Telstra is also looking to leverage its 5G network for spectators through augmented and virtual reality devices.

What else has been happening with Telstra?

The Telstra share price has also received attention from factors closer to home.

Since the start of 2021, shares in the telco giant have surged more than 30%.

By comparison, the S&P/ASX 200 Index (ASX: XJO) has only managed to claw 10.5% higher for the year to date.

Telstra shares have been propelled by several catalysts.

In late June, Telstra announced that it will be selling its mobile towers infrastructure business.

The telco expects to receive $2.8 billion after transaction costs with completion of the acquisition expected in Q1 of FY22.

In addition, the Telstra share price has also been buoyed by strong earnings for FY21 and positive broker sentiment.

Most recently, investment bank Goldman Sachs rated Telstra shares as a buy with a 12-month share price target of $4.40 a share.  

At the time of writing, the Telstra share price is trading slightly higher for the day at around $3.95.

The post Own Telstra (ASX:TLS) shares? Then you’re helping develop flying cars appeared first on The Motley Fool Australia.

More reading

• Widgie Nickel (ASX:WIN) share price jumps 45% after IPO
• ASX 200 (ASX:XJO) midday update: Evergrande news boosts market, Zip’s Indian investment
• 3 beaten-up ASX shares that are exciting us: experts
• 5 things to watch on the ASX 200 on Wednesday
• How does the AFIC (ASX:AFI) share price compare to its net tangible assets?

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The BHP Group Ltd (ASX: BHP) share price is climbing higher on Wednesday as fears around the Evergrande collapse have subsided for the time being.

Why the BHP share price is climbing on Wednesday

To understand why shares in the iron ore miner are climbing today, it pays to understand why they initially fell. BHP was one of many ASX shares under pressure on Monday and Tuesday. That was largely due to news of Chinese property developer, Evergrande’s, financial troubles emerging.

Investors were skittish earlier this week as fears of a knock-on impact sparked a broad sell-off on the ASX. The BHP share price fell 3.4% from Friday’s close to Tuesday afternoon as iron ore shares slid lower.

One of the reasons the iron ore miners were in focus was the potential knock on effect of an Evergrande collapse. Some noted a slowdown in the economy, including the construction sector, could weigh on iron ore demand.

However, those fears appear to have subsided somewhat for the moment. The broader S&P/ASX 200 Index (ASX: XJO) is up 0.7% today while the Aussie miners are performing strongly.

With the BHP share price up 2.7% at the time of writing, it looks like some investors are willing to buy up despite the uncertainty. It’s a similar story for the other Aussie miners on Wednesday afternoon.

The Fortescue Metals Group Limited (ASX: FMG) is up 4.7% on Wednesday while Rio Tinto Limited (ASX: RIO) shares are up 2.8% to $98.41 per share.

Foolish takeaway

The BHP share price is rebounding strongly on Wednesday as the Chinese economy fears appear to have subsided for now. Shares in many of the Aussie iron ore miners are climbing higher despite the looming situation surrounding Evergrande.

It’s welcome news for investors in these Aussie companies after two straight days of losses to start the week.

The post BHP (ASX: BHP) share price lifts as China fears abate…for now appeared first on The Motley Fool Australia.

More reading

• ASX 200 jumps as Evergrande confirms it will meet next interest repayment
• Iron ore price may fall further as experts warn of China trade risk
• What the Evergrande crisis could mean for ASX 200 iron ore shares
• ASX 200 rebounds into positive territory led by energy and materials shares
• The final BHP (ASX:BHP) dividend will be paid to shareholders today. Here’s what to expect

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is back on form and charging higher. At the time of writing, the benchmark index is up 0.6% to 7,316 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are racing higher:

Champion Iron Ltd (ASX: CIA)

The Champion Iron share price is up 7% to $5.00. This morning the team at Citi upgraded the iron ore producer’s shares to a buy rating with a $6.40 price target. The broker made the move on valuation grounds following a pullback in its share price recently. Promising news out of China has also boosted its shares.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price is up 5% to $15.50. Investors have been buying this iron ore producer’s shares following positive news out of China. According to Reuters, embattled property giant Evergrande has staved off defaulting for the time being. This afternoon it announced that it would be making a bond repayment tomorrow.

Lake Resources N.L. (ASX: LKE)

The Lake Resources share price has jumped 23% to 62.5 cents. This morning the lithium developer announced a partnership with Lilac Solutions. The partnership is for technology and funding to develop Lake’s Kachi Lithium Brine Project in Argentina. Under the terms of the agreement, Lilac Solutions will contribute technology, engineering teams, and an on-site demonstration plant. It can also earn a maximum 25% equity stake in the Kachi project based on performance-based milestones.

Zip Co Ltd (ASX: Z1P)

The Zip share price is up 4% to $6.50. The catalyst for this was the announcement of a major investment. According to the release, Zip has agreed to make a strategic US$50 million investment in India-based BNPL operator ZestMoney. The Indian BNPL provider has 11 million registered users, over 10,000 online merchants on the platform, and a point of presence in over 75,000 physical stores.

The post Why Champion Iron, Fortescue, Lake Resources, & Zip are racing higher appeared first on The Motley Fool Australia.

More reading

• Why the Fortescue (ASX:FMG) share price is up 5% today
• ASX 200 jumps as Evergrande confirms it will meet next interest repayment
• Champion Iron (ASX:CIA) share price up 7% but could still go 28% higher
• ASX 200 (ASX:XJO) midday update: Evergrande news boosts market, Zip’s Indian investment
• Zip (ASX:Z1P) share price higher on India BNPL investment news

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Investors of ASX 200 insurance companies may not be too pleased today.

The sector is underperforming the market as The Australian reports the industry is bracing for a wave of claims in the wake of this morning’s Melbourne earthquake.

At the time of writing, shares in Insurance Australia Group Ltd (ASX: IAG) are $4.92 – down 1.99%, QBE Insurance Group Ltd (ASX: QBE) shares are $11.31 – up 0.31%, and Suncorp Group Ltd (ASX: SUN) is trading for $12.31 – down 1.01%. The S&P/ASX 200 Index (ASX: XJO) is 0.84% higher.

Let’s take a closer look at today’s news.

Earthquake strikes Victoria

Just after 9 this morning, a 5.9 magnitude earthquake struck 10km from the Victorian town of Mansfield. Heavy shaking was felt in Melbourne with tremors felt in Tasmania, the ACT, and even Sydney.

A video circulating social media shows the damage experienced by at least one building on Melbourne’s popular Chapel Street.

Just got sent this video from a friend in Melbourne pic.twitter.com/SWOpRdirkJ

— Tom Steinfort (@tomsteinfort) September 21, 2021

https://platform.twitter.com/widgets.js

While the extent of the damage is unclear following the earthquake and subsequent aftershocks at the moment, investors in ASX 200 insurance companies aren’t taking any chances.

For FY22, IAG increased its natural perils (i.e., disasters) allowance from $658 million to $765 million. QBE was already above its allocated amount when it released its half-year results and Suncorp also increased its allowance for the current financial year to $980 million.

Considering this is the most powerful earthquake in Victoria since European settlement, at least according to one seismologist, this may not have been the forecasts of these ASX 200 insurers.

According to The Australian, insurers lost $3.2 billion the last time Australia had such a powerful earthquake – the 1989 tremor that hit Newcastle.

ASX 200 insurers share price snapshot

Over the past 12 months, the IAG share price has increased 10.1%, the QBE share price lifted 29.6%, and the Suncorp share price jumped 46.3%.

QBE and Suncorp have overperformed the S&P/ASX 200 Index (ASX: XJO) over the same period while IAG has underperformed the index by about 16 percentage points.

The market capitalisations of these companies range from $12-$17 billion.

The post Here’s why ASX 200 insurers are underperforming the market this Wednesday appeared first on The Motley Fool Australia.

More reading

• Why the QBE (ASX:QBE) share price is on a rollercoaster today
• IAG (ASX:IAG) share price slumps 2% amid earthquake payout concerns
• 2 excellent ASX dividend shares named as buys
• 5 things to watch on the ASX 200 on Wednesday
• IAG (ASX:IAG) share price gains after Chief Risk Officer resignation

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Fortescue Metals Group Ltd (ASX: FMG) share price is bouncing off 14-month lows, up 4.95% to $15.48.

The broader S&P/ASX 200 Index (ASX: XJO) and, more specifically, the resources sector has reacted positively to news that China’s embattled real estate developer Evergrande will meet its bond interest payments due Thursday, 23 September.

At the time of writing, the ASX 200 is up 0.74% to 7,327.7 with the S&P/ASX Energy (INDEXASX: XEJ) and S&P/ASX Materials (INDEXASX: XMJ) indices up 2.53% and 2.51% respectively.

What’s the significance of Evergrande’s repayments?

China’s second-largest real estate developer is on the verge of collapse as it struggles to find the liquidity to pay off upcoming liabilities.

The Evergrande debacle has exposed the vulnerable underbelly of Chinese property developers taking on dangerous amounts of leverage with a dependency that housing prices will continue to boom.

Evergrande’s US$300 billion in liabilities is tied to more than 128 banks and 121 non-banking institutions, meaning its default could spark a domino effect across the Chinese and, potentially, global economy.

Evergrande calmed nervous markets on Wednesday, saying it will make a coupon repayment on its bonds due Thursday, 23 September.

According to Reuters, Evergrande appointed Houlihan Lokey and Admiralty Harbour Capital as joint financial advisers last week. The two firms will evaluate the Group’s financial position and explore solutions to ease its dire situation.

A slowdown in China’s property and construction sectors have significant flow-on effects for the price of iron ore and, subsequently, the Fortescue share price.

According to S&P Global, China’s property and infrastructure construction accounts for 55% of its steel consumption.

Fortescue share price bounces as iron ore prices trade flat

Iron ore prices have dropped sharply lower in the past few days, falling from US$123.84 a tonne last Monday to US$93.03 a tonne on Tuesday, according to Fastmarkets.

Iron ore logged steep losses almost every day, with its first positive green day on Tuesday, edging 5 US cents higher to US$93.03.

The post Why the Fortescue (ASX:FMG) share price is up 5% today appeared first on The Motley Fool Australia.

More reading

• ASX 200 jumps as Evergrande confirms it will meet next interest repayment
• What the Evergrande crisis could mean for ASX 200 iron ore shares
• What this leading broker is saying about the Fortescue (ASX:FMG) share price
• Leading brokers name 3 ASX shares to sell today
• ASX 200 rebounds into positive territory led by energy and materials shares

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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