Economy

Chinese stocks drop as zero-Covid protests erupt across country

Shares in China fell on Monday after protests against the country’s harsh Covid-19 policies erupted in Beijing, Shanghai and other cities over the weekend that weighed on market sentiment and added to uncertainty about the outlook of the world’s second-largest economy.

In Hong Kong, the Hang Seng China Enterprises index dropped as much as 4.5 per cent on Monday morning, while China’s CSI 300 index of Shanghai- and Shenzhen-listed shares fell as much as 2.8 per cent. The stock benchmarks later pulled back to be down about 2 and 1.5 per cent, respectively.

The declines in Chinese stock benchmarks followed demonstrations across the country railing against harsh pandemic restrictions. Discontent has surged after a fire in the city of Urumuqi killed 10 people on Thursday, prompting a series of vigils across China as authorities denied allegations that coronavirus restrictions had hampered rescue efforts and prevented residents from escaping the blaze.

Traders said the protests added to uncertainty about China’s direction as Covid-19 cases continued to rise, pressuring local officials to step up economically disruptive enforcement of President Xi Jinping’s strict zero-Covid policy.

“Investor confidence has already been battered this year, and it’s difficult to comprehend what the direction of the market will be next,” said Louis Tse, managing director of Hong Kong-based brokerage Wealthy Securities.

Tse added that investors were also concerned about a lack of additional support for China’s economy as case numbers hit record highs and undercut a rally that has pushed the Hang Seng China Enterprises index up more than 17 per cent this month following an extended sell-off.

The increasingly muddled outlook for China’s economy also weighed on the renminbi. The Chinese currency fell as much as 1.1 per cent to Rmb7.24 against the dollar, despite the US dollar index measuring the greenback against its international peers holding steady in early Asian trading.

Martin Petch, vice-president at Moody’s Investors Service, said the protests “have the potential to be credit negative if they are sustained and produce a more forceful response by the authorities”.

“Though this is not our base case,” he added, “this would lead to an increased level of uncertainty over the degree of political risk in China, spilling over into damaged confidence and hence consumption in an already weakened economy.”

The unrest also weighed on equities elsewhere in Asia, with Japan’s benchmark Topix down 0.7 per cent, South Korea’s Kospi off 1 per cent and Taiwan’s Taiex off 1.2 per cent.

Futures tipped shares in the rest of the world to follow Asia lower, with the FTSE 100 set to shed 0.5 per cent and the Euro Stoxx 50 expected to dip 0.6 per cent. The S&P 500 was set to shed 0.6 per cent when trading begins on Wall Street later in the day.

Most Related Links :
Public News Time Latest News Sports News Finance News Automobile News

Root link

Related Articles

Back to top button