Stock prices are falling rapidly in Hong Kong as China is hit with a renewed COVID-19 outbreak in important cities like Shenzhen. Dave Sebastian reports for The Wall Street Journal:
The rout in Chinese stocks deepened as the country’s escalating battle with Covid-19 rattled a market already contending with potential U.S. delistings, domestic regulatory pressure and the global economic consequences of the war in Ukraine.
After a 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 register its lowest close since March 2016, while the Hang Seng Tech Index retreated 11%—the benchmark’s biggest one-day percentage decline since it was introduced in July 2020. Stocks in Chinese consumer-facing companies dropped sharply, with major decliners including brewers, property developers, restaurant chains, casino operators and technology platforms.
Figures showed China’s daily count of locally transmitted Covid-19 cases topped 1,000 on Thursday for the first time in roughly two years, before surging above 3,000 and 2,000 on Saturday and Sunday, respectively. The tallies, while low by global standards, are a challenge to China’s zero-tolerance approach to the pandemic.
“The Covid situation in China has deteriorated at an alarming pace over the past week,” Nomura economists said in a note to clients. They warned that China’s economy could be severely hit, with in-person services closed in a rising number of cities, travel growing more difficult and some construction projects and manufacturing likely to be halted.
Shenzhen has halted public transport and nonessential businesses until at least Sunday as officials carry out three rounds of mass testing. The northeastern city of Changchun, an auto-manufacturing center, introduced similar measures on Friday. In Shanghai, schools have shifted to online classes, while movement into and out of the city has been curtailed.
Hong Kong-listed shares of online-travel agency Trip.com Group fell 17%, as did those of food-delivery company Meituan. Macau casino operators retreated, with Wynn Macau falling 13% to 5.12 Hong Kong dollars, a record closing low.
Read more here.