China’s top leader, Xi Jinping, secured a breakthrough third leadership term on Sunday and introduced a new Politburo Standing Committee with loyalists in a clean sweep. would not have been seen since the days of Communist Party founder Mao Zedong.
Financial markets were mixed on expectations that Xi’s policy agenda of bolstering national security and the party’s political security would shift the world’s second-largest economy to a state-run model. more leadership. That could make maintaining political ties and party ideology a higher priority than achieving economic growth and policy reform, economists said.
Fawad Razaqzada, market analyst at City Index and Forex.com, said China’s asset sell-off partly reflects expectations Xi will continue with the country’s COVID-free policy, which has led to comprehensive shutdown in an effort to contain the virus, said Fawad Razaqzada, market analyst at City Index and Forex.com.
“Investors are also worried that because Xi loyalists are concentrated at the top of the decision-making body, there is the potential for more policy mistakes that could cause serious damage. for future growth. Mr. Xi will have much to say about how future policies will shape,” wrote Razaqzada.
China’s stock market fell on Monday with Hong Kong’s Hang Seng
HSI,
ended 6% lower to a new 13-year low. Mainland China shares also plunged on Monday, though not by much. Shanghai Composite
SHCOMP,
2% lower completion and 300 benchmark CSI
000300,
down 2.9%.
United States, New York-listed shares of China-based companies plummeted China’s top five companies by market capitalization totaled $55 billion as of Monday afternoon, according to Dow Jones Market data. Tech giant Alibaba Group Holding Ltd.
TORTOISE,
Tencent Holdings Ltd.
TCEHY,
and Meituan
MPNGY,
decreased by 12.5%, 14.2% and 16.7% respectively.
See: Xi’s power move punishes Chinese stocks, sending them down 26% in one day
The broader US markets have shaken off concerns, with the Dow Jones Industrial Average
DJIA,
up more than 400 points, or 1.3%, while the S&P 500
SPX,
1.2% increase.
Meanwhile, China’s offshore yuan
CNHUSD,
fell 1.3% to $7.3253 per dollar on Monday, an all-time record low based on data from 2010, according to Dow Jones Market Data.
Live Market: A historic bad day for the Chinese yuan
The sale of many China-related properties is particularly jarring based on better-than-expected third quarter GDP data. China’s economy grew 3.9% in the three months ended September 30 from a year earlier, the government said Monday in a statement that was abruptly postponed as Communist Party leaders focus on last week for congress.
Third-quarter operating results exceeded market consensus by 3.4% and up from 0.4% growth in the previous quarter, as growth was weighed down by a prolonged harsh lockdown. two months in Shanghai. However, the data put average growth for the first nine months of 2022 at 3.0%, well below the full-year target of 5.5% the government set in March.
See: China’s improved economic growth overshadowed by Xi’s power
Investors have been battered by China’s economic slowdown, in large part due to a stubborn strain of COVID-19 that has swept across the country this year, shutting down hundreds of millions of people. Many had hoped China’s leaders could turn around from the strict COVID-19 restrictions after the party congress.
However, Julian Evans-Pritchard, senior China economist at Capital Economics, said the outlook remains bleak as the number of cities with outbreaks and closures has increased to levels seen during the period. the peak of the Omicron wave earlier this year.
“There is no prospect of China lifting its no-COVID policy in the near future, and we do not expect any meaningful easing before 2024,” Evans-Pritchard said. know in a note Monday. “As a result, recurrent virus disruptions will continue to affect human activity and further large-scale lockdowns cannot be ruled out.”
See: Markets are watching as China’s Party Congress opens this weekend. What investors need to know.
The “zero-COVID” approach also exacerbated the weakness in the country’s heavily indebted real estate sector. Investors fear the housing market crisis could turn into a mortgage crash and hope Xi and his new standing committee can provide more policy support to stimulate change sales exchange.
“There is also little sign of an impending change in the real estate sector,” said Evans-Pritchard. “We think official GDP will grow only 3.5% next year, with real growth likely to be even weaker.”
In addition, the downturn in the real estate market may continue to hold back commodity demand and affect investor sentiment.
Boris Ivanov, founder of Emiral Resources Ltd., said: “As China is the largest consumer of goods in the world thanks to its population and growth rate, its economic health has a major impact on commodity price process – especially metals and minerals”.
“President Xi’s speech to the National People’s Congress on Sunday (October 16) signaled that this (zero-COVID) policy will not change. This will be bad news for investors and producers of metals & minerals like iron ore or crude oil, who prefer less draconian policies that dampen demand for commodities.”
Base metal prices were higher on Monday, as better-than-expected economic data from China raised hopes of stronger demand. The most-traded November contract on the Shanghai Futures Exchange rose 1.3% to 63,910 yuan ($8,809.70) a tonne, while aluminum rose 0.1% to 18,640 yuan. currency/ton. On the New York Mercantile Exchange, futures for December
HGZ22,
fell 4 cents, or 1.3%, to $3,4305 a pound.
