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Chinese stocks fall as the blockade of Covid-19 adds to investor concerns

The plunge in Chinese stocks has deepened as the intensifying battle with Covid-19 has shaken markets that are already in conflict with potential US delisting, domestic regulatory pressures, and the impact of the war in Ukraine on the global economy. rice field.

Following the recent surge in coronavirus infections, authorities have imposed restrictions on cities, including Shenzhen, the southern financial and technology hub where companies such as Huawei Technologies are based.

On Monday, Hong Kong’s flagship Hang Seng Index fell 5% to its lowest since March 2016, while the Hang Seng Index fell 11%. This is the largest daily percentage decline in the benchmark since it was introduced in July 2020. Consumer companies have plummeted, with a significant decline in brewers, real estate developers, restaurant chains, casino operators, technology platforms and more.

According to figures, the number of Covid-19 cases of local infection in China exceeded 1,000 on Thursday for the first time in about two years, and exceeded 3,000 and 2,000 on Saturday and Sunday, respectively. Aggregation is a challenge, albeit low by global standards. To China’s zero-tolerance approach to pandemics.

“China’s Covid situation has deteriorated at an alarming pace in the past week,” Nomura’s economist said in a note to customers, which could hurt China’s economy seriously. Warned. Travel becomes more difficult and some construction projects and manufacturing may be discontinued.

Shenzhen has shut down public transport and unnecessary businesses until at least Sunday as authorities conduct three high-volume tests. Changchun, a city in the northeastern part of the car manufacturing center, introduced similar measures on Friday. In Shanghai, schools have moved to online classes. Access to the city is restricted.

Hong Kong-listed stocks of online travel agency Trip.com Group fell 17%, similar to stocks of food delivery company Meituan...

Macau casino operators have receded, with Wynn Macau down 13% to HK $ 5.12, a record low.

Other stocks recording double-digit declines included the developer’s country garden, restaurant group HaiDiLao Hotpot and Yum China.,

And brewery China resource beer..

According to Refinitiv, Monday’s Asian time selling suffered significant losses in both the US and Asia late last week. ..

Last week’s biggest impetus was that the Securities and Exchange Commission tentatively named five China-based companies that couldn’t inspect audit documents. This could signal the delisting of these groups as early as 2024.

Many Chinese companies have secured a second listing in Hong Kong, mitigating the impact of the final delisting, but these companies may not have access to Hong Kong-listed stocks because some investors may not have access to them. Investor pool may shrink. -Research firm CreditSights said.

Hao Hong, Head of Research and Chief Strategy Officer at Bocom International, said the blockade could have affected China’s land market more than Hong Kong. Said Mr. Hong.

The CSI300 index, the largest stock listed in mainland China, fell 3.1% on Monday.

“As long as there is pressure, we will lower the Hang Seng Index,” Hong Kong said, saying that many US-listed Chinese tech companies make up a significant portion of Hong Kong’s key benchmarks. rice field. He said.

Among the largest tech stocks, Tencent Holdings fell 9.8% and rival Alibaba Group Holdings’ Hong Kong-listed stocks fell 11%. The Wall Street Journal reported Monday that Tencent is facing record fines from China’s central bank.

Barry Wang, co-portfolio manager at China Opportunities at Oberweis Asset Management, said last month that an order demanding food delivery companies like Meituan to reduce prices worked to help the government implement the goals set last year. And how the regulatory environment remains uncertain. Fund.

Wang said last year that China’s Internet stocks were sold out and were not ready for reinvestment. “I don’t think it’s the right time because of the great amount of uncertainty.” solved. “

Write to Dave Sebastian (dave.sebastian@wsj.com)

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