Chinese whispers turn into a low roar – ShareCafe
It’s rare to see the government of an advanced economy causing so much damage to stock prices, but as of Friday’s close, we had a good idea of the extent of the financial losses that the Chinese Communist Party-led government has taken. inflicted on its market and that of Hong Kong over the past two months.
The huge collapse of the Chinese and Hong Kong markets has been eclipsed by the strength of the European and American markets, the rise in Covid infections and the rapid collapse of Afghanistan last week and the takeover of the troubled country by the Taliban.
While Covid Delta has provided a belated overlay on the harsh crackdown on China’s top performing industry – its huge and dynamic online businesses across all sectors of the digital world – the real destruction of value and reputation is due to paranoia and the desire for total control of President Xi Jinping and his gang.
Chinese tech stocks slumped to new lows on Friday and the Hong Kong benchmark hit an almost 10-month low as Chinese regulatory crackdowns crushed stock values and investor confidence .
In fact, at Friday’s close, the Hang Seng is now in correction territory – down 20% from its February high and the blue-chip Chinese CSI 300 index is down almost 18% in the same time.
Reuters estimated that more than $ 560 billion in market value was wiped off the Hong Kong and mainland stock exchanges last week as investors bailed out once-hot sectors of once-hot companies, fearing they would be trapped by the next attack from Beijing regulators.
The Hang Seng fell 1.8% and its weekly decline of 5.8% was the largest since the peak of pandemic panic in financial markets in March 2020.
The Shanghai market also fell, as investors sold off risky corporate debt and the Chinese currency which recorded its biggest weekly loss in two months as investors rushed to safety amid related global concerns. to coronaviruses.
Investors sold off Chinese and Hong Kong stocks of Chinese tech giants and turned to US-listed stocks of the same companies that had fallen in value amid the continued crackdown.
U.S.-listed shares of Alibaba Holding Group, Tencent Music Entertainment Group, Didi Global and iQiyi Inc rose 1% to 4.5% on Friday.
Just last week, China announced tougher rules on competition in the tech sector, summoned executives at real estate developer Evergrande to warn them to cut the company’s massive debt and state media reported impending regulations for alcohol manufacturers, a preferred investment for foreign fund managers.
Reuters says as the crackdown continues from the steel industry to e-commerce and education, the moves are undermining confidence in a market that still appears to be bottoming after months of selling.
The Shanghai Composite fell 1.1% to its lowest close in more than two weeks on Friday and the CSI 300 index fell 1.9% with liquor makers leading the losses. This index has lost nearly 10% this year (against an 18% gain for Wall Street).
The epicenter of the liquidation has been the tech sector, which was popular with foreign investors who are now worried about not being able to quantify regulatory risk and are selling in droves.
Hong Kong’s Hang Seng Tech Index, made up of many one-time darlings, fell 2.5% on Friday to a new high and has lost around 48% since February.
Hong Kong shares of e-commerce titan Alibaba fell 2.6% to a record closing low and were halved from the October high. Internet giant Tencent hit a 14-month low and food deliveryman Meituan hit a one-year low.
Reuters said that as a result, Alibaba is now posting its lowest price-to-earnings ratio since listing in New York in 2014 and Tencent its lowest in more than eight years.
And all of that, plus Covid Delta came at a time when the decline in July economic data on Monday showed that China’s economic recovery had slowed to the lowest rate this year.
Debt risks are rising, consumer demand is weakening along with factory output, and regulatory crackdown is crushing confidence just as the economy is faltering.
The continued crackdown on scorching real estate prices, for example, strained markets and business credit fell further on Friday with news that heavily in debt Evergrande had been reprimanded by regulators.
The Hong Kong dollar is near its one-and-a-half-year low, which also suggests that the silver is leaving the city and China itself.