Embattled Chinese housing giant Evergrande said Wednesday it had agreed a deal with domestic bondholders that should allow the conglomerate to avoid default on one of its interest payments.

Financial markets have tumbled over fears that the Chinese group could collapse, with the potential to derail the world's second-biggest economy.

In a statement to the Shenzhen stock exchange, Evergrande's property unit Hengda said it had negotiated a plan to pay interest due on its 2025 bond, which Bloomberg News calculated was worth 232 million yuan ($35.9 million).

There was no mention of its repayments on interest for an offshore bond.

In the statement, Hengda said investors "who bought and held the bonds" before September 22, 2021 "are entitled to interest paid this time".

Analysts said the repayment will go some way to soothing anxious markets in the short term.

But "for confidence to return more meaningfully, it will need the market to see sight of the broad restructuring plans for Evergrande", Gary Dugan, chief executive officer at the Global CIO Office, told Bloomberg.

The Evergrande crisis has even triggered rare protests outside the company's offices in China by investors and suppliers demanding their money -- some of whom say they are owed as much as $1 million.

- 'Tremendous pressure' -

While predominantly a developer, Evergrande -- which employs 200,000 people, has a presence in more than 280 cities and claims to indirectly generate 3.8 million Chinese jobs -- has been on a buying spree for more than a decade.

But the group has admitted facing "tremendous pressure" as it tackles a debt pile of more than $300 billion, and had warned that it may not be able to meet its liabilities.

Earlier this week, Xu Jiayin, the company founder, told staff he believes the group will "step out of the darkest moment soon".

The company has hired experts including financial services firm Houlihan Lokey -- which advised on the restructuring of Lehman Brothers -- as it tries to avoid a collapse.

Bloomberg reported last week that state regulators have dispatched a team of financial advisers to assess the company.

Abdul Abiad, director of the macroeconomic research division at the Asian Development Bank, told reporters at a virtual briefing that China's "banking system's capital buffers are strong enough to absorb a shock even of Evergrande's size, should it materialise".

"It warrants careful monitoring because housing is an important component of the Chinese economy... housing makes up a substantial portion of household wealth so obviously if the property sector is impacted that could have knock-on efforts for the broader Chinese economy," he added.

In a report issued earlier this week, the S&P ratings agency said it believed authorities in Beijing would intervene if they considered any large-scale fallout was likely to materialise.

Asian investors soothed by Evergrande bond plan
Hong Kong (AFP) Sept 22, 2021 - Asian investors trod carefully on Wednesday but nerves appeared to be settled by news that troubled Chinese property giant Evergrande had agreed a plan to repay interest on one of its key bonds, for now avoiding a default that many fear could hammer the domestic and global economy.

However, confidence remains at a premium as traders await a crucial meeting of the Federal Reserve, where it could announce a timetable to start tapering its vast monetary easing programme.

That comes against the ever-present backdrop of spiking coronavirus infections and slowing global growth, as well as a brewing battle over the US debt ceiling that, if not resolved, could see a default in the world's top economy, potentially sparking another financial catastrophe.

In Asia, eyes were on mainland Chinese markets as investors returned to work from a four-day weekend to catch up with Monday's rout fanned by feverish talk that one of the country's biggest developers was close to collapse.

While Tuesday saw a little more stability return to trading floors, there remained a lot of uncertainty and there is a hope that the government will at some point break its silence and give an idea about how it intends to deal with the crisis.

With debts topping $300 billion and no way to make cash, there had been an expectation that it would not be able to meet its interest obligations Thursday on two bonds -- one offshore and one domestic -- which would put it effectively in default.

However, Wednesday got off to a positive start with news it had agreed a plan to repay interest on the local note, providing much-needed relief, though there was no news on the overseas payments.

There was also some cheer from a huge cash injection into financial markets by the central People's Bank of China that eased any liquidity concerns.

The Evergrande news "will be helpful and hopefully suppress some of the inevitable volatility and downside after the holiday break", Gary Dugan, chief executive officer at the Global CIO Office, said.

- Eyes on Fed -

However, he added: "For confidence to return more meaningfully, it will need the market to see sight of the broad restructuring plans for Evergrande."

The PBoC move "suggests that (officials) are monitoring the situation closely and are ready to step in if the economy comes under risk", strategist Jun Rong Yeap, at IG Asia, said.

While Shanghai fell, it dropped far less than expected, while Tokyo, Singapore and Taipei also slipped.

However, Wellington, Manila, Bangkok and Jakarta rose, with Sydney also in positive territory as investors there brushed off news of a rare earthquake that caused damage in the second-largest city of Melbourne.

The conclusion of the Fed's policy meeting later in the day is being nervously awaited.

Fed officials have signalled that by the end of the year they will begin winding in the ultra-loose monetary easing measures put in place at the start of the pandemic and which have been key to driving the global economic and equity recovery.

The growing consensus is that the first announcement will be in November and the first reduction the next month. But Fed boss Jerome Powell could still provide details on the timetable.

The decision comes as the Fed tries to keep a lid on surging inflation and prevent the recovering economy from overheating.

Meanwhile, US lawmakers are struggling to head off growing unease that the government is in danger of running out of cash and defaulting on its own bond repayments next month unless its debt limit is suspended.

Treasury Secretary Janet Yellen has warned such a scenario would cause a "historic financial crisis".

Oil prices extended Tuesday's strong gains on signs that US stockpiles had seen a hefty drop last week, lifting demand optimism.

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Crunch time for Evergrande, but no 'Lehman moment'
Hong Kong (AFP) Sept 21, 2021
With the future of Evergrande hanging in the balance, global markets have plunged on fears that one of China's biggest developers could collapse and cause a contagion throughout the world's number two economy and beyond. Talk of a "Lehman moment" has rung loud this week as worried investors try to ascertain whether the crisis could be a replay of the bankruptcy of Wall Street titan Lehman Brothers during the 2008 global financial crisis. While predominantly a developer, Evergrande - which emplo ... read more