China stocks continued their descent on Tuesday as surging Covid cases in Beijing added to investors’ worries over growth in the world’s second largest economy.
Hong Kong stocks recovered slightly after Monday’s hefty losses but mainland markets fell even further with traders on edge over a Covid flare-up that has led to lockdowns in the country’s major cities.
The blue-chip CSI300 index closed 0.81% lower at 3,784.12, the Shanghai Composite Index lost 1.44% to 2,886.43 points, while the Hang Seng inched back up.
Three-quarters of Beijing’s 22 million people lined up for Covid tests on Tuesday as authorities in the Chinese capital raced to stamp out an outbreak and avert the debilitating city-wide lockdown that has shrouded Shanghai for a month.
“Market attention will likely shift from Shanghai to Beijing, as a worsening Covid situation in China’s capital city could have a more profound influence on the future path of a zero-Covid strategy,” said Nomura in a note.
Analysts are worried that larger scale of outbreaks and China’s adherence to zero-Covid policy would further disrupt supply chains, cloud growth outlook and dent investor sentiment.
According to Nomura, there are 46 cities that are currently implementing full or partial lockdowns, or some kinds of district-based control measures, taking up 24.3% of China’s population and 35.1% of China’s GDP.
Real estate developers rose 1.2% as several Chinese developers attended talks with China’s central bank last week to discuss the sale of distressed assets and other ways to support the sector that has been battered by defaults, sources said.
The energy sub-index slumped 3.5%, with coal tumbling 4.2% as the prolonged Shanghai lockdown stoked fears about global demand outlook.
Semiconductors and new energy shares closed down 2.8% and 2.1%, respectively.
Musk Twitter Deal Buoys Tech Stocks
Hong Kong stocks crawled higher and the Hang Seng Index added 0.33%, or 65.37 points, to close at 19,934.71, while the Shenzhen Composite Index on China’s second exchange sank 2.11%, or 37.75 points, to 1,752.28.
News that Elon Musk had clinched a deal to buy Twitter for $44 billion in cash buoyed tech stocks. Hong Kong’s tech sector rallied 2.3%, boosted by large firms such as Tencent and Alibaba.
Tokyo stocks closed higher, extending gains on Wall Street while investors kept a cautious eye on Chinese shares.
The benchmark Nikkei 225 index rose 0.41%, or 109.33 points, to 26,700.11, while the broader Topix index firmed 0.11%, or 1.99 points, to 1,878.51.
Indian stocks advanced too with Mumbai’s signature Nifty 50 index up 1.46%, or 246.85 points, to close at 17,200.80.
Seoul, Taipei and Jakarta ticked higher, though Sydney, Singapore, Wellington, Bangkok and Manila fell. London, Paris and Frankfurt were all up in the morning.
Fed Rate Hike Fears
World shares steadied after a late revival on Wall Street, although growth fears stoked by China’s Covid situation and fears of aggressive Fed tightening sapped risk appetite, lifting the dollar to new two-year highs.
The MSCI world equity index rose 0.1% from six-week lows by 0812 GMT, helped by a gain of 0.7% in Europe’s STOXX 600 index on strong earnings by companies such as bank UBS and shipping group Maersk.
The nervousness about China’s economic slowdown hit Australian shares, with a drop of 2.1% in the benchmark index, hurt particularly by declines in miners.
Markets have also been fretting that an aggressive pace of tightening by the US Fed could derail the global economy, which has only just started to recover from the pandemic.
The Fed is expected to raise rates by a half a percentage point at each of its next two meetings.
In currency markets, the dollar was in fine fettle on safe-haven demand. The dollar index against a basket of rivals rose to fresh two-year highs and was last up 0.2% at 101.9.
China’s offshore yuan fell 0.2% to 6.5832 per dollar, but stayed above Monday’s year-low of 6.609 after the People’s Bank of China said it would cut the amount of foreign exchange banks must hold as reserves.
Key figures at 0810 GMT
Tokyo – Nikkei 225 > UP 0.4% at 26,700.11 (close)
Hong Kong – Hang Seng Index > UP 0.3% at 19,934.71 (close)
Shanghai – Composite > DOWN 1.4% at 2,886.43 (close)
London – FTSE 100 > UP 0.7% at 7,429.29
Brent North Sea crude > DOWN 0.5% at $101.78 per barrel
West Texas Intermediate > DOWN 0.7% at $97.83 per barrel
New York – Dow > UP 0.7% at 34,049.46 (Monday close)
- Reuters with additional editing by Sean O’Meara