China Stocks Drop Most in a Month on Covid Flareups, Tech Fines
Comment of the Day

July 11 2022

Commentary by Eoin Treacy

China Stocks Drop Most in a Month on Covid Flareups, Tech Fines

This article from Bloomberg may be of interest to subscribers. Here is a section:

Chinese stocks had their worst day in about a month as a Covid resurgence, combined with fresh fines for the country’s tech giants, sent investors running for the door.

The Hang Seng China Enterprises Index, a gauge tracking mainland firms listed in Hong Kong, slumped 3.1%, its biggest loss since mid-June. Tech heavyweights, property developers and electric-vehicle makers were among the biggest drags. 

A slew of bad news hit the Chinese market over the weekend and Monday morning, including regulatory fines on past transactions done by Alibaba Group Holding Ltd. and Tencent Holdings Ltd., a rejection by China Evergrande Group’s bondholders on a proposal to extend debt payment, and a warning by a prominent investor’s wife that a key lithium maker’s stock is overvalued. 

The selloff is a reminder that the nation’s Covid Zero policy and lingering uncertainty toward tech crackdowns remain key risks for investors betting on a sustained rebound in Chinese shares. The Hang Seng China gauge has recorded just one positive session in the last eight after rallying nearly 30% from a March low.  

Eoin Treacy's view

The pandemic continues to be a major factor in the daily life of China, even as the rest of the world moves on. The reality of a large population with little immunity and the threat of rapidly evolving strains are growing more infectious suggests the quarantine system will slow the advance but can never overcome it.

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