Economy

Hong Kong stocks tumble after Xi appointments fan economic fears; yuan weakens By Stocksak

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© Stocksak. FILE PHOTO. People walk past a screen showing the Hang Seng stock indicator at Central district, Hong Kong, China July 19, 20,22. REUTERS/Lam Yik

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HONG KONG/SHANGHAI Stocksak – Stocks fell in Hong Kong on Monday as fears grew that Xi Jinping will intensify his ideology-driven policies to the detriment of economic growth.

In early trade, the slumped over 4%

Tech giants listed in Hong Kong Alibaba (NYSE:) Group Holding Ltd. and Tencent Holdings(OTC:) Ltd plunged over 7%, and the Hang Seng Tech Index dropped more than 5% to a new record low. The Hong Kong-listed Chinese developers lost more than 7 percent.

Xi achieved a record-breaking third term of leadership on Sunday, and established the new Politburo Standing Committee stacked full of loyalists.

Ales Koutny of Janus Henderson Investors, emerging market portfolio manager, stated that China’s appointments “show China moving beyond economic pragmatism toward political ideology”.

“The message here was clear: COVID Zero lockdowns. Shared prosperity agenda. and sectorial crackdowns. We are not going anywhere,” said he, adding that he believed these threats would limit China’s annual growth to only 2-3%.

China’s gross national product (GDP), rose 3.9% year-on-year in the July-September quarter, according to official data. However, it was not enough for investors to be encouraged.

Stocks fell more on mainland markets, which are less susceptible to foreign selling. They were also supported by a surge of Chinese defense-related stocks. Investors bet that geopolitical tensions will increase, especially over Taiwan.

China’s bluechip CSI300 index fell by 2% while the index lost 1%

It dropped to 7.2790 dollars per dollar, which is close to record levels. Also, the People’s Bank of China lowered the mid-point rate to its lowest level since June 1, 2019, which was the lowest it had ever set.

Goldman Sachs (NYSE) analysts wrote in a client letter on Sunday that the absence of market-oriented economic reformers in China’s top leadership meant that the risk premium for China offshore equities could “stay elevated in the short term”.

They also stated that they expect China’s strict zero-COVID policy to begin to relax in the second quarter of next.

Stocks in tourism, leisure, and hotel & catering – sectors that have been ravaged the zero-COVID policy – also saw steep declines.

News Source and Credit

Stocksak Editorial

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