China stocks fall as COVID flare-ups, policy uncertainty weigh

SHANGHAI: China stocks fell on Friday, as COVID-19 flare-ups added to concerns of a dim economic outlook, amid fears that growth will be sacrificed for ideology-driven policies under President Xi Jinping’s new leadership team.

** The blue-chip CSI 300 Index dropped 1% by the end of the morning session, and the Shanghai Composite Index lost 0.8%.

** The Hang Seng Index declined 2.3%, and the Hang Seng China Enterprises Index retreated 2.9%.

** For the week, the CSI 300 Index tumbled 4% and is set to post its biggest weekly fall in three-and-a-half months, while the Hang Seng Index, down 7%, poised to record the worst weekly performance since March 2020.

** From Wuhan in central China to Xining in the northwest are doubling down on COVID-19 curbs amid rising cases.

** Xi secured a precedent-breaking third leadership term on Sunday and introduced the new Politburo Standing Committee stacked with loyalists, leading to a panic selling by global investors on Monday.

China stocks inch higher ahead of party congress outcome

** “The greater concentration of power under President Xi may lead investors to price in the risk of a continuation of pandemic controls, less support for the private sector, greater geopolitical tensions with the US, and heightened risk of policy mistakes,” UBS analysts wrote in a note.

** “Overall, we remain neutral on Chinese equities. We are cautious on the short-term path of the Chinese market and avoid making directional calls untill greater certainty arrives.”

** New energy firms declined 2%, while real estate developers and consumer staples lost roughly 1.5% each.

** Since the end of the Party Congress, the zero-COVID policy execution “has been clearly stepped up in a rising number of cities, as containing COVID remains a key performance measure for local officials,” Nomura wrote in a note.

** Tech giants listed in Hong Kong plunged 3.7%, while mainland property developers tumbled 4.4%.