Embattled Chinese property titan Evergrande said Wednesday it had agreed a deal with domestic bondholders that should allow the conglomerate to avoid missing one of its interest payments and avoid default, but its deeper debt burden remains.

Financial markets have been hit this week over fears that the sprawling firm could collapse, with the potential to pulse through the world's second-biggest economy and possibly beyond.

Chinese authorities have injected capital into the markets yet have remained conspicuously silent over Evergrande's woes, allowing rare protests from despairing investors and leaving analysts guessing over Beijing's plans to mop-up any spillover from the developer's demise.

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, worth 232 million yuan ($35.9 million).

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

Yet founder Xu Jiayin, a billionaire once counted as Asia's richest man, on Tuesday said the company will "step out of the darkest moment soon".

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

The group has made no mention of its larger repayments on interest for an offshore bond due Thursday — a payment worth $83.5 million on a dollar-denominated bond, in what observers view as a big test for the company.

Even if it misses the payment, the company would still have a 30-day grace period before it is deemed in default.

Evergrande did not reply to AFP requests for comment.

Analysts said Wednesday's 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 News.

The Evergrande crisis has triggered protests outside a number of 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.

– Waiting on Beijing –

Given the company's liabilities, analysts and investors have speculated the government will likely step in with some kind of help for the corporate giant to prevent a damaging implosion.

But the vagueness of the filing — which did not give details on how much it would pay and when — left others warning the company remains deep in trouble.

The payment announcement "is likely only a temporary reprieve with no signals from the Chinese government over what steps, if any, it will take to assist an orderly wind down or restructuring," said Jeffrey Halley, an analyst at OANDA.

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.

The company has hired experts including financial services firm Houlihan Lokey — which advised on the restructuring of Lehman Brothers when it went under during the global financial crisis — as it tries to avoid a collapse.

State regulators have also dispatched a team of financial advisers to assess the company, according to reports.

News of the deal provided support to equities Wednesday, with Shanghai leading most Asian markets up, even as traders returned from a long weekend break to play catch up with Monday's global rout.

The Shanghai market closed 0.40 percent higher on Wednesday although Shenzhen crept down 0.25 percent.

Abdul Abiad, director of macroeconomic research 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".

This week the central bank pumped some $14 billion into financial markets to soothe worries about a potential liquidity squeeze off the back of the Evergrande crisis.

Asian investors soothed by Evergrande bond plan
Hong Kong (AFP) Sept 22, 2021 –

Asian markets mostly rose on Wednesday with nerves settled for now by news that troubled Chinese property giant Evergrande had agreed a plan to repay interest on one of its key bonds, 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, on Wednesday the firm's property unit Hengda said 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.

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

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

– Eyes on Fed –

And observers pointed out that the agreement was vaguely worded as the statement did not specify the amount of interest paid or when.

Jeffrey Halley, an analyst at OANDA, warned: "The coupon payment story is likely only a temporary reprieve with no signals from the Chinese government over what steps, if any, it will take to assist an orderly wind down or restructuring."

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

The 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.

Shanghai ended with gains as investors returned from a four-day weekend.

Wellington, Manila, Mumbai, Bangkok and Jakarta all rose, with Sydney also edging up investors there brushed off news of a rare earthquake that caused damage in the second-largest city of Melbourne.

Tokyo, Singapore and Taipei ended down.

London, Paris and Frankfurt all enjoyed big gains at the open.

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.