SHANGHAI: Chinese stocks plunged on Monday as a continued surge of COVID cases further clouded the economic outlook, while regulatory concerns and US delisting risks sent Hong Kong-listed tech giants to a new low, dragging down the Hang Seng benchmark.
The rapid spread of the virus in China is heightening investors’ worries over slowing growth, highlighted on Monday by figures showing new bank lending fell more than expected in February while broad credit growth slowed.
It has also reinforced expectations that China’s central bank could move as soon as Tuesday to cut key interest rates to support growth. That drove Chinese benchmark 10-year government bond futures 0.61% higher on Monday, the biggest one-day jump since early December.
“I think the outbreaks impose downside risk to China’s economy, at least in the next few months,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
The CSI Tourism index plunged 6.3%, as investors fretted over the impact of strict control measures. It led a 3.1% fall in the blue-chip CSI300 index, and a 2.6% drop in the Shanghai Composite - the index’s biggest daily drop since July 24, 2020.
The smaller Shenzhen Composite Index fell 2.9% and the start-up board ChiNext Composite index was 3.6% weaker.
Falls were exacerbated by heavy selling by foreign investors through China’s Stock Connect programme. Refinitiv data showed outflows totalling 11.04 billion yuan ($1.74 billion) on the day.
China has reported more local symptomatic COVID-19 cases so far this year than it recorded in all of 2021, as the highly transmissible Omicron variant triggers outbreaks from Shanghai to Shenzhen.
The surge, which has seen China report its highest daily infections figures in two years, potentially complicates Beijing’s “dynamic-clearance” ambition to halt the spread as quickly as possible.
China’s southern technology hub of Shenzhen suspended public transport including buses and subways from Monday, and the financial hub of Shanghai locked down some housing and office compounds.
Adding to investors’ concerns over the regulatory environment, China’s cyberspace regulator issued a new set of draft measures on Monday aimed at protecting minors, demanding online gaming, livestreaming, audio and video platforms to set up a “youth mode” for minors.
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