The risk-sensitive Australian Dollar fell versus the USD overnight as US stocks collapsed on Wall Street. Technology and small-cap stocks led the losses, with the Nasdaq 100 index sinking over 2% at the closing bell. A potential credit crisis in China is dragging sentiment over hot coals, as investors weigh contagion risks stemming from a possible collapse of the real estate giant Evergrande Group and its recent warnings about defaulting on debt payments.
Evergrande’s share price fell over 10% in Hong Kong on Monday, bringing the total year-to-date loss to over 86%. Some are comparing the price drop to that seen in Bear Sterns in the early days of the 2007/2008 financial crisis. In another comparison to that period, there is speculation that Beijing may step in to bail out the company, much like the US did with big banks during the US housing crisis.