SOME of the world's largest financial institutions are exposed to the ongoing crisis at Chinese firm Evergrande, it became apparent late last night.

Funds managed by the UK's largest bank, HSBC, alongside the world's biggest fund manager, BlackRock, hold the ailing property developer's bonds, according to Morningstar data.

The funds ramped up purchases of Evergrande bonds just months before the developer nearly defaulted.

BlackRock purchased five different Evergrande bonds in August, while a high risk HSBC fund has increased its holdings of the firm's debt by 38 per cent since February, according to the Financial Times.

Swiss investment bank, UBS, also has heavy exposure to the Chinese firm's debt, according to the data.

Concerns over the ramifications if Evergrande collapses dimmed yesterday as investors reassessed how much the firm's debt had poisoned financial institutions around the world.

But markets were still choppy.

Japan's Nikkei slid 2.17 per cent, while Hong Kong's Hang Seng gained 0.51 per cent on Tuesday.

London's FTSE 100 cancelled out Monday's losses, rising 1.12 per cent yesterday, while the pan-Europe Stoxx 600 added one per cent.

Evergrande boss, Hui Ka Yan, reassured staff yesterday that the firm's "darkest moment" would pass.

£ MARKET REPORT, P16

Q&A

CHINA's Lehman. The trigger for a global market correction. The reasons for collapsing global commodity prices. These are some of the accusations levelled at ailing Chinese property developer, Evergrande. But are they true? WHAT IS EVERGRANDE? The world's most indebted property developer, with an estimated £305bn worth of liabilities on its balance sheet. It is a Chinese company, founded in 1996, which primarily builds large apartment blocks in the country's biggest cities. It claims to have built around 12m homes. It has expanded into other sectors, including owning Guangzhou football club and setting up an electric car business. HOW CONTAGIOUS WOULD A COLLAPSE BE? China is the world's largest consumer of raw materials. Demand for raw materials could plummet if Evergrande's troubles spread to the rest of China's construction sector and trigger an even sharper crackdown by the country's regulators. Global investors and banks have significant amounts of capital tied up in the property giant. Defaults could sour sentiment and magnify losses, leading to financiers reining in lending and engineering a full-blown credit crunch. WHAT COULD HAPPEN? The crisis is a liquidity problem at heart, exemplified by the fact Evergrande is paying some investors in property. If it fails to fulfill an interest payment scheduled for this coming Thursday, expect market panic to intensify across the world.

(c) 2021 City A.M., source Newspaper