Chinese markets slump as Covid protests spook investors

Reopening stocks 

Property and tech shares were among the worst performers in the Monday selloff, while reopening stocks including airlines and restaurants proved relatively resilient. 

The moves underscore a mixed response among traders as some brush aside the social unrest and focus more on the eventual zero-Covid exit.  

“The protests create uncertainty but the destination of opening up has been set since the party congress,” said Robert Mumford, an investment manager at GAM Hong Kong Ltd. 

“One suspects this sort of public pressure might encourage a faster pace of opening which would be a positive but it remains to be seen how the authorities react to recent events.”  

Assets have rallied in November as directives for a less-restrictive pandemic approach, coupled with strong support for the property sector, gave investors confidence that the worst is well behind. 

A growing number of Wall Street players had turned upbeat on China following Beijing’s policy steps to shore up the economy. On Friday, the People’s Bank of China lowered the reserve requirement ratio for the second time this year.  

The rally has fizzled in the last few days as authorities grapple with a record number of Covid cases.  

Hong Kong’s Hang Seng Index fell 2.2pc as of 10.47am local time, while a separate gauge of Chinese tech stocks fell by a similar extent, having fallen more than 5pc earlier. On the mainland, the CSI 300 Index declined 1.7pc.  

“Assuming the Covid policy would not change much, and we cannot rule out the risk that it gets tougher, the government will likely inject more liquidity to cool down the bond yields,” said Gary Ng, senior economist at Natixis SA in Hong Kong. “However, this will not be enough to calm the market.”

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