China's Evergrande crisis roils markets

 (21 September 2021)  Global stock markets are sharply lower this week as Evergrande, China's second largest real estate developer, teeters on the brink of bankruptcy.  While default now seems inevitable, the more important question is whether the Chinese government will provide a bailout.  Even a partial bailout of its $300 billion in debt would help not only the 1.5 million customers who invested their savings in new homes, but it also would reduce the risk of financial contagion.  Evergrande is large enough that a disorderly default would damage the Chinese economy and therefore could have ramifications for investors all over the world. 

The Evergrande crisis can be seen as a part of an ongoing attempt of the Xi government to tighten regulations throughout the financial sector.  Earlier this year, the CCP imposed stricter anti-trust regulations on tech and internet companies such as Alibaba.  The regulatory initiative is seen as a part of a campaign to bring the free-wheeling Chinese economy under closer political control by the CCP. 

Chinese stocks have suffered the consequences of the new restrictions this year as stocks have fallen more than 25% from their February high.  The decline can be seen in the horoscope of the Shanghai Stock Exchange (SSE - December 19, 1990, 9.30 a.m.).  Very quickly we can see the problem in the chart: Saturn, the planet of loss and constraint, is exactly conjunct the Ascendant at 13 degrees of sidereal Capricorn.  Saturn is the most bearish of all planets so its alignments usually coincide with declines, especially when they involve important chart points like the Sun, Moon or the Ascendant. 

Interestingly, Chinese stocks began their long descent in February just as Saturn was also transiting the Ascendant during its normal forward motion.  Now retrograde, it is once again crossing over the Ascendant and as stocks are similarly mired in a period of pessimism.  

We can also see that the apparent peak of this crisis is occurring while three malefics, Saturn, Rahu, and Mars, are all in 120 degree alignments with the SSE Ascendant. In the short term, further downside is possible when Mars exactly aligns with Saturn and the Ascendant later this week and early next week.  Chinese stocks are likely to remain under pressure for a while yet since Saturn isn't due to end its retrograde cycle until October 10.  A rebound of some size becomes much more likely after Saturn makes its final conjunction with the SSE Ascendant in November. 


Weekly Market Forecast

Given this week's ongoing Saturn-Rahu-Mars alignment, US and global stocks are also vulnerable to further downside in the coming days.  Tomorrow's FOMC statement could well see a relief rally, however, as Mercury enters sidereal Libra and aligns with Jupiter and the Moon.  But downside risk will be somewhat elevated as we approach the Mercury retrograde station next Monday. 

For more details, check out my weekly subscriber newsletter which is published every Saturday afternoon (EST).   I outline the key technical and planetary influences for US and Indian stocks for the short and medium term, as well as currencies, gold and oil.

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