China Stocks Drop as COVID-19 Raises Worries
Many China cities are adopting new restrictions, from business suspensions to lockdowns. As new infections are contained, Shanghai prepares for another mass testing campaign. It recently detected the BA.5 Omicron subvariant. China’s central bank brought in a minimum of $447.41 million through open market operations since last week. It is the sixth day that the market suspects politicians are gradually abandoning monetary easing in crisis mode, delivered during the COVID-19 lockdown.
Chinese stocks fell on Monday. A surge in domestic cases of COVID-19 has dampened sentiment. Politicians’ concerns about the monetary easing of the crisis regime also weighed in. At the end of the morning session, the CSI300 index fell to 4.344.26 by 1.9%. The Shanghai Composite Index lost 1.5% to 3,307.23.
The Hang Seng index decreased by 2.7% and reached 21.130.67. Hong Kong’s China Enterprises Index lost 3.0% to close at 7,324.46. Many cities in China are adopting new restrictions, from business suspensions to lockdowns/to contain new infections, with Shanghai preparing for another mass testing campaign following the discovery of the BA.5 Omicron sub-variant.
Action by China’s central bank brought in at least 3 billion yuan through open market operations for the sixth straight day since last week. The market suspects that policymakers are gradually abandoning monetary easing in crisis mode; delivered during the COVID-19 lockdown.
China could consider further deficit spending by central and local governments to finance small business support if needed. Energy stocks lost 3.7%. Non-ferrous metals fell by 4.3%. Tourism and semiconductors were down more than 2.5%. New Energy shares fell 3.5%, Tianqi Lithium and Chengxin Lithium lost 10%.
China Stocks and European Shares
Macau ended the whole casinos on Monday after further than almost two years. Due to this, shares of gaming companies are falling. Authorities are struggling to contain the worst outbreak of COVID-19 yet to hit the world’s biggest gaming hub. Hong Kong-listed tech giants fell 3.7%. Media reports that delays remain in talks between the US and China regarding the abolition of stocks. Mainland property developers listed in Hong Kong fell nearly 5% amid debt woes in the sector.
European stock markets were trading sharply lower on Monday, with investors taking a cautious stance amid energy concerns in the region, ahead of the US inflation report, which could signal another significant interest rate hike. The DAX traded 1.3% lower. CAC 40 in France by 1.5%. And the FTSE 100 fell by 0.9%. The optimistic tone of last week was largely erased on Monday. Investors are eagerly awaiting the release of the latest CPI reports from several countries, primarily the US.
Alibaba and Tencent
The stocks of Chinese technology companies Tencent and Alibaba dropped sharply on Monday. After regulators fined its subdivisions for defecting to reveal transactions and erroring to acquiesce to antitrust laws. Alibaba shares fell 6.8% in Hong Kong. Tencent was down 3.2%. On Sunday, China’s State Market Regulation Administration published a list of 28 deals that violated antitrust rules.
This included five Alibaba transactions as well as 12 Tencent transactions. A large-scale crackdown on the technology sector has often hit stock prices in Hong Kong and Shanghai. The maximum penalty for each violation was $74,500. A large-scale crackdown on the technology sector has often hit stock prices in Shanghai and Hong Kong. However, there are signs that the government may be scaling back the stimulus gains of recent months.
Alibaba shares are up 70% since mid-March. Tencent added 18% before Monday’s loss. According to experts, the failure is likely to be temporary. The market was more cautious about raising US interest rates so sharply. However, this is simply overcome by new penalties. A surge in coronavirus cases, which has fueled fears of more pandemic lockdowns in Shanghai, also weighed on investor sentiment.