Hong Kong stocks had their worst day since the 2008 global financial crisis, a day after Chinese leader Xi Jinping. he held power with iron grip hour is the main political gathering.
Fearing the fallout from the Communist Party’s leadership change, foreign investors dumped Chinese stocks and the yuan despite the release of stronger-than-expected GDP data. They worry that Xi’s rise to power will lead to the continuation of Beijing’s current policies and further collapse of the economy.
Hong Kong Hang Seng Benchmark
(HSI) The index fell 6.4% on Monday, its biggest daily decline since November 2008. The index closed at its lowest level since April 2009.
The Chinese yuan weakened sharply and hit a 14-year low against the US dollar on the onshore market. In the more freely traded offshore market, the currency lost 0.8%, nearing its weakest level on record as China’s economy grew 3.9% in the third quarter from a year ago, according to the National Bureau of Statistics. . Economists polled by Reuters had expected a 3.4% increase.
The sharp sell-off came a day after the ruling Communist Party announced its new leadership for the next five years. In addition to securing an unprecedented third term as party chairman, Xi has filled out a new leadership team. faithful devotees.
A number of senior officials who supported market reforms and economic opening were absent from the new top team, raising concerns about the country’s future direction and its relationship with the United States. Among those kicked out are Premier Li Keqiang, Vice Premier Liu He and central bank governor Yi Gang.
“The change in leadership appears to have prompted foreign investors to unload Chinese investments, prompting a sharp sell-off in Hong Kong-listed Chinese stocks,” said Ken Cheung, chief Asia forex strategist at Mizuho bank.
The GDP data marked an uptick from 0.4% growth in the second quarter, when China’s economy was rocked by widespread Covid lockdowns. Shanghai, the country’s financial center and major global trade hub, was closed for two months in April and May. But the growth rate was still below the official annual target set by the government earlier this year.
“The outlook remains bleak,” Julian Evans-Pritchard, chief economist at China Capital Economics, said in a research note on Monday.
“There is no prospect of China lifting its zero-Covid policy in the near future, and we don’t expect any meaningful relaxation until 2024,” he said.
All headwinds will continue to put pressure on China’s economy, he said, along with the further weakening of the global economy and the continued decline of China’s real estate.
Evans-Pritchard expected China’s official GDP to grow by just 2.5% this year and 3.5% in 2023.
Monday’s GDP date was originally scheduled to be released during China’s Party Congress on October 18, but was postponed without explanation.
Cheung said the possibility that policies such as zero-Covid and “Common Prosperity” – which resulted in a large-scale lockdown to contain the virus – could increase Xi’s bid to redistribute wealth was a cause for concern.
“With the Politburo Standing Committee, which is made up of close allies of President Xi, market participants read the results as President Xi’s consolidation of power and policy continuation,” he said.
Mitul Kotecha, head of emerging markets strategy at TD Securities, also noted that the loss of reformists from the new leadership bodes ill for the future of China’s private sector.
Kotecha said: “The departure of officials and reformers considered to be pro-promotion from the Politburo Standing Committee and being replaced by Xi’s allies suggests that the ‘Common Prosperity’ will be the main thrust of the officials.”
Under the banner of the “Common Prosperity” campaign, Beijing launched a large-scale crackdown on the country’s private enterprise, hitting almost every industry in its core.
“The [market] In our view, the reaction is consistent with reduced prospects of significant stimulus or changes to a zero-Covid policy. Overall, prospects for re-acceleration of growth are limited,” Kotecha said.
In China’s tightly controlled domestic market, the Shanghai Composite Index fell 2%. The tech-heavy Shenzhen Component Index lost 2.1%.
The Hang Seng Tech Index, which tracks the 30 largest technology firms listed in Hong Kong, fell 9.7%.
(babysitter) and Tencent
(TCEHY) – the crown jewel of China’s tech sector – both lost more than 11%, shedding $54 billion in stock market value.
The sale also spread to the United States. Shares in Alibaba and several other leading Chinese stocks, such as EV companies Nio
(NIO) and XpengAlibaba competes with JD.com
(JD) and Pinduoduo
(PDD) and search engine Baidu
(BIDU)all fell sharply on Thursday afternoon.
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