As a result of Chinese President Xi Jinping’s choice to give important economic positions to supporters of his zero-Covid agenda, Hong Kong markets fell 5% Monday, hitting a 13-year low.
The Hang Seng Index dropped by 4.99 percent, or 809.48 points, towards the close of the morning session to finish at 15,401.64 by the break, which was its lowest point since the global financial crisis of 2009 at that time.
The Shenzhen Composite Index on China’s second market dropped 0.35 percent, or 6.88 points, to 1,960.04 while the Shanghai Composite Index down 0.89 percent, or 27.19 points, to 3,011.74.
The government won’t probably change its approach to battling Covid outbreaks with lockdowns and other stringent measures, as shown by Xi’s desire to cram his leadership with allies as he tightens his grip on power.
Although data released on Monday indicated that the world’s second-largest economy grew faster than expected in the third quarter, the policy has been attributed for the significant decline in growth, and traders are still on edge.
“The more centralised power becomes, the more the risk of overzealous policy implementation based on directives from the top,” Duncan Wrigley, at Pantheon Macroeconomics, said.
“This happened in some of the lockdowns in the second quarter.”
Since Xi’s crackdown on the industry in recent years has slashed corporations’ profitability and knocked billions off their values, tech firms were among the worst impacted during the sell-off.
Alibaba, JD.com, and other large e-commerce sites all experienced declines of almost 10% each, while Tencent lost more than 8%. The Hang Seng tech index dropped 6.7%.
The sell-off overshadowed other Asian markets’ usually promising starts, when traders were encouraged by a Wall Street surge following news that the Federal Reserve would scale down its rate hike program.
According to Dickie Wong of Kingston Securities, “the Hong Kong market is experiencing a panic selling phase.”
“While China’s macroeconomic data exceeded expectations, the market is on the decline as uncertainty is increased by the leadership change and ongoing tensions between China and the US.”
