China shares, yuan fall after top leaders double down on ‘zero-Covid’ policy

SHANGHAI: China stocks fell on Friday, tracking a slump in global equity markets on inflation fears, after the country’s top leaders said they would stick with the dynamic “zero-COVID” policy, stoking worries of a further economic downturn.

The CSI300 index fell 2.6% to 3,906.44 points at the end of the morning session, while the Shanghai Composite Index declined 2.3% to 2,996.98 points.

The Hang Seng index dropped 3.6% to 20,051.61 points. The Hong Kong China Enterprises Index fell 4.1% to 6,827.79.

China’s yuan weakened sharply against a strengthening dollar, with both the onshore spot yuan and its offshore counterpart slipping to their weakest levels against the dollar since Nov. 4, 2020.

China will fight any comments and actions that distort, doubt or deny the country’s COVID-19 response policy, state television reported on Thursday, after a meeting of the country’s highest decision-making body.

Relaxing COVID controls will lead to large-scale infections, and China will step up research into its defence against virus mutations, and avoid one-size-fits-all policies, the meeting of the Standing Committee of the Communist Party’s politburo said.

“The economy was barely mentioned at the meeting, suggesting Beijing may have become more determined to maintain the zero-COVID strategy,” said Nomura in a note.

“People are worried about the zero-COVID policy and lockdown of major cities,” said Steven Leung, executive director of institutional sales at brokerage UOB Kay Hian in Hong Kong.

The controversial “zero-COVID” policy, which economists say is very hard to be balanced with economic growth, has placed residents in the financial and commercial hub of Shanghai under a more than one-month lockdown, disrupting supply chains and business operations.

Sentiment was dented even though State TV cited country’s cabinet on the same day as saying China will roll out more support measures to help small firms and stabilise employment, including the introduction of policies to support the platform economy as soon as possible.

“Government officials have been working very hard to speak more positively regarding what they’re going to do to push the economy, but investors are still waiting for the impact and for real numbers to come out,” UOB Kay Hian’s Leung said.

Global equity markets are also down as investors worry aggressive central bank policies around the world to tamp down inflation could easily shackle growth.

Stocks fell across the board, with real estate developers down 4.5%, consumer staples losing 3.2%, and tourism firms tumbling 6.3% to lead the losses.

Tech giants listed in Hong Kong tumbled more than 5%, with index heavyweight Alibaba Group, Tencent and Meituan falling between 4.5% and 6.5%.

Mainland developers trading in Hong Kong plunged nearly 6%, while healthcare firms declined 4.6% – Reuters

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