The once in five years Communist Party Congress has recently concluded and President Xi Jinping’s reiteration of his policies has led investors to rush out of Chinese stocks, starting Monday, said a report by Bloomberg.
On Friday, the situation worsened when an index of Chinese shares traded in the Hong Kong stock market dipped to the lowest level since 2008, making it one of the worst-performing stock gauges for the year. This week’s losses have reportedly shocked local as well as global investors.
This comes after the twice-a-decade meeting during which Xi placed allies in several top-most positions in the country and sought to increase state control on markets and the economy leaving little space for the opposition.
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Furthermore, this week the Hang Seng China Enterprises Index saw a loss of over 8% after investors pulled a record of $2.5 billion from mainland stocks on Monday alone. While the HSCEI gauge sank 7.3% in its biggest plunge since the global financial crisis of 2008 on the same day.
The report suggests that following Monday’s rout the markets had more or less stabilised but Friday’s dip served as a reminder of the risks of dip buying when it comes to Chinese shares. Notably, the rapid selloffs come ahead of China’s appointments of key party and cabinet members which is expected to take place in the upcoming weeks.
This is also as the government has imposed fresh lockdowns in Wuhan in line with Beijing’s zero-Covid policy while Xi has also reiterated his calls for China’s economic self-reliance. Christina Woon, the investment director for Asia equities in Singapore told Bloomberg it is, “Hard to say how the selloff plays out, but again, a sustained recovery in investor confidence is still dependent on developments like changes to China’s zero COVID policy.”
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Mainland China’s stock market also fell but relatively less as the country’s CSI 300 Index, down 5.4% for the week, which was the worst in the past 15 months, while the Shanghai Composite ended 4% lower. Meanwhile, traders are reportedly struggling to determine how Xi’s consolidation of power will affect and change China’s political and economic landscape.
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