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Chinese stocks and yuan fall as Beijing braces for Shanghai-like lockdown

Dino Kurbegovic

Mainland Chinese indexes turned red and led to a drop-off, as Asian markets fell sharply on Monday, April 25. The Shenzen Component Index fell 6.08% to 10,379.28, while the Shanghai Composite Index declined by 5.13% to 2,928.51, its biggest one-day drop since February 2020.

Elsewhere, The Hang Seng Tech index dropped “only” 2.96%, Alibaba (NYSE: BABA) took the lead, with the e-commerce giant’s shares slipping 2.86%.

AFP’s bureau chief, Jerome Taylor, shared his concerns connecting the losses with the new Covid lockdowns in Shanghai and Beijing.  

Aside from the stock indexes, it seems that the Chinese Yuan has fallen as a result of concerns over lockdowns.

Source: Twitter

Near-term Covid issues 

Beijing authorities have mandated 3.5 million residents and workers in Chaoyang district, cities largest, to report for three coronavirus tests this week, after new symptomatic cases were recorded. Meanwhile, Shanghai remains locked down for a fourth consecutive week, with cases reported to be over 2,000 a day.  

With streets in Beijing apparently less crowded and business slowing, it seems that the market participants are selling shares, worried about the effect the lockdowns will have.  

Timothy Moe, the chief Asia-Pacific equity strategist at Goldman Sachs, stated

“It’s no surprise and it makes all sorts of logical sense that the market should be concerned about the Covid situation because that clearly is impacting economic activity. It’s impacting earnings potential for many parts of the market.”

As per Mr. Moe, policy support is being prepared to alleviate pressures, especially in terms of infrastructure spending; however, little can be done if the cities remain in lockdown. 

Market participants should also monitor the general trajectory in Asian economies; on Friday, April 22, the S&P 500 fell 2.8%, and with this pain in Asian markets, a continuation of last week’s trend is feasible.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

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